Rate-sensitive stocks such as real estate, banks and automobile makers dropped sharply on the bourses after the Reserve Bank of India (RBI) left its key policy rates unchanged on Tuesday even as the equity market was expecting a rate cut after the recent 75 basis points rate cut by the US Federal Reserve.
RBI left its policy rates as well as the cash reserve requirement (CRR) that commercial banks need to keep with the apex bank unchanged. “(The) market was disappointed,” said Nilesh Shah, chief investment officer of ICICI Prudential Asset Management Co. Ltd, which manages Rs16,000 crore worth of equity assets. “Everyone was expecting a rate cut,” he said.
Sensex, the benchmark index of the Bombay Stock Exchange (BSE), lost about 400 points from Tuesday’s high to close at 18,091.94, with a 0.34% or 60.84 point loss, even as the National Stock Exchange’s broader 50-stock Nifty index gained 0.13% to close at 5,280.80.
Apart from the Sensex, Australia’s benchmark index, ASX200, was the sole loser in Asia-Pacific.
The bank and real estate indices were the top losers among BSE’s 13 sectoral baskets. The BSE Bankex lost 3.48%, or 400 points, to close at 11,120.42, while the BSE Realty index lost 2.7%, or 288 points. The basket of automobile stocks, however, remained flat.
Among the 38 banks on BSE, only seven stocks gained. Bank of India, Canara Bank, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Baroda stocks dropped the most—between 7% and 5%.
In the realty pack, Unitech Ltd was down 5.59%. Other stocks such as Housing Development and Infrastructure Ltd, Mahindra Lifespace Developers Ltd and Peninsula Land Ltdlost between 5.4% and 4%. Only two stocks—Sobha Developers Ltd and Pheonix Mills Ltd—gained among the 14 constituent stocks in the realty index. “The stocks that rallied on expectations of a rate cut have dropped the most,” said Anita Gandhi, head of institutional business at Arihant Capital Markets Ltd, a domestic brokerage. “Most of these stocks had gained during weak market conditions last week.”
Strong gains made by auto-ancillary stocks helped BSE auto index from big losses, even as vehicle manufactures such as Bajaj Auto Ltd, Hero Honda Motors Ltd, Ashok Leyland Ltd and Maruti Suzuki India Ltd dropped between 3.28% and 0.6%.