Home / Market / Stock-market-news /  Sensex closes in the red after RBI leaves repo rate unchanged, banking stocks hit

Mumbai: The Reserve Bank of India’s (RBI) decision on Wednesday to hold the policy rate weighed heavy on the market, but the Sensex quickly recovered in a volatile trade, closing lower by only 45 points at 28,290. Banking stocks took a heavy pounding. RBI left interest rate unchanged at 6.25%, contrary to market expectations, and shifted the policy stance to ‘neutral’ from ‘accommodative’.

Its projection of 7.4% growth for 2017-18 is a sign that RBI expects economy to rebound sharply from the demonetisation impact, which came across as a positive that contained the losses. Governor Urjit Patel today lowered the GDP growth forecast to 6.9% for 2016-17. Because of the shock factor, the 30-share index at one point plunged 186 points.

But some fag-end buying in banking and other stocks helped the index recover, which settled at 28,289.92, still down 45.24 points, or 0.16%. The gauge had lost 104.12 points in the previous session. However, the wider Nifty after hitting a low of 8,715 closed in the green by rising 0.75 point, or 0.01%, at 8,769.05.

The reverse repo rate—at which RBI absorbs excess liquidity—is retained at 5.75%. Meanwhile, the rupee continued to trade higher at 67.20 (intra-day) against the American currency, which supported the late recovery in stocks. Interest-sensitive stocks took a hammering, dragging the BSE banking index down by 0.37%.

PNB, Axis Bank, ICICI Bank, Kotak Bank, IndusInd Bank, Bank of Baroda and SBI and ended lower by up to 1.32% in a knee-jerk reaction to the RBI decision.

Other laggards were Dr Reddy’s, Sun Pharma, Hero MotoCorp, Infosys, ITC, NTPC, Tata Steel, RIL, Maruti Suzuki and HUL. Out of the 30-share Sensex pack, 15 ended lower while 14 led by Coal India, GAIL, M&M, Lupin, Tata Motors, Cipla, TCS and Wipro finished higher and cushioned the fall. Sector-wise, the BSE FMCG index fell by 0.39%, healthcare 0.26% and IT 0.18%.

In contrast, broader markets were in a better shape with the mid-cap index rising 0.51% and small-cap up 0.22%. Meanwhile, foreign portfolio investors (FPIs) bought shares worth a net Rs201.13 crore on Tuesday, as per provisional data released by the stock exchanges.

Other Asian markets closed higher, with Japan’s Nikkei advancing 0.51%, China’s Shanghai Index 0.44% and Hong Kong’s Hang Seng 0.66%.

European markets too were trading in the positive terrain in their early deals. Frankfurt’s DAX 30 gained 0.27% while France Paris CAC climbed 0.69% and London’s FTSE rose 0.03%.

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