The Reserve Bank of India announced a 25 basis points cut in the Repo rate this morning, but its warning that there is not much scope for further easing due to uncomfortable inflation levels hurt sentiment and prompted investors to press sales in rate sensitive stocks. As sentiment turned weak, stocks from other sectors too drifted lower on profit taking, and the benchmark indices Sensex and Nifty ended the session with notable losses.
There was a fairly smart recovery after the market fell post release of the monetary policy, but selling resumed soon and stocks faltered once again to end the session on a weak note.
The Reserve Bank of India, unveiling its monetary policy today, cut repo rate by 25 basis points to 7.25%. It left the CRR unchanged at 4%. The central bank said that the balance of risks stemming from its assessment of the growth-inflation dynamic provides little space for further monetary easing, and this view weighed on sentiment and triggered a sell-off in the market.
The apex bank said the wholesale price inflation will be in a range around 5.5% during the current financial year. The bank said it will take steps to contain inflation to a level of 5% by the end of fiscal 2014, using all instruments at its command.
The BSE benchmark Sensex, which plunged to 19,542.63, ended the session with a loss of 160.13 points or 0.81% at 19,575.64. The Nifty index of the National Stock Exchange closed at 5944, off the day's low of 5930.15, recording a loss of 55.35 points or 0.92%.
Bank stocks were the worst hit in the sell-off today, and mirroring their fall, the BSE Bankex tumbled by 2.4%. Automobile and realty stocks too mostly ended notably lower. Oil, consumer durables and power stocks closed weak as well.
Select pharmaceuticals, FmcG and information technology stocks moved up. Capital goods and metal stocks had a good outing. Midcap and smallcap stocks were mostly subdued. Though smallcap stocks plunged early on, support at lower levels pulled many of them out of their lower levels.
Tata Motors, State Bank of India, IDFC, ICICI Bank, DLF, Punjab National Bank, Jaiprakash Associates, BPCL and Axis Bank lost 3% - 4%.
Bajaj Auto ended nearly 3% down. GAIL India lost around 2.8%. Power Grid Corporation, Bank of Baroda, Cipla, ACC, HDFC Bank, ONGC, Ranbaxy Laboratories and IndusInd Bank ended lower by 1% - 1.8%.
Tata Consultancy Services, ITC, HDFC, Maruti Suzuki, Cairn India, Tata Power, NMDC and Asian Paints also ended notably lower.
Ambuja Cements closed 0.8% down despite the company reporting a sharp surge in net profit for the quarter ended 31 March 2013.
Metal stocks Jindal Steel & Power (3.8%), Hindalco (2.4%), Tata Steel (2.3%) and Sesa Goa (1.9%) ended sharply higher.
IT stocks HCL Technologies and Infosys gained 2.3% and 1%, respectively.
Sun Pharmaceutical Industries, Lupin, Larsen & Toubro, Ultratech Cement, Mahindra & Mahindra, Kotak Bank, Reliance Infrastructure, BHEL and Bharti Airtel closed with sharp to moderate gains.
The market breadth was weak. Out of 2503 stocks traded on BSE, 1339 stocks declined. 1027 stocks moved up and 137 stocks ended flat.