Sensex falls for second day, RBI's neutral stance disappoints the Street4 min read . Updated: 04 Apr 2019, 03:57 PM IST Staff Writer
- The RBI today cut repo rate by 25 basis points
- Analysts say that a 25-bps cut was factored in
After remaining volatile for most part of the session, stock markets came under strong selling pressure in late trade. The Sensex ended 192 points lower to 38,684, extending losses to the second day. Nifty settled at 11,598, down 0.40%. IT and banking stocks led the losers. TCS fell 3% while HCL Tech, Wipro and Infosys were among the top losers in the IT pack.
As widely expected, the RBI today cuts repo rate by 25 basis points but retains its neutral stance, disappointing the Street. Banking stocks came under pressure, with Yes Bank, RBL Bank and IndusInd Bank and ICICI Bank among the top losers.
Among other heavyweights, RIL fell 1.6% while HDFC Bank edged 0.20% lower.
Bond yields spiked and the rupee fell sharply after five members of the monetary policy committee of the RBI favoured maintaining the stance as neutral while with one member voted for change in the stance to accommodative.
"Bond markets were hoping for some signal of further easing post today's cut. However, the monetary policy statement and the commentary did not hint on the same, also almost unanimous vote on maintaining stance as neutral affected the sentiment," said Kunal Shah, fund manager for debt at Kotak Mahindra Life Insurance.
Bond yields may remain under some pressure for some time, he added. However, "if monsoon performance is not bad and food prices remain low bond markets will start pricing in more easing and yields will move lower. One of the important for markets will be election outcome as it will have bearing on fiscal stance," he said.
Going forward, the market trend will be influenced by the capital flows into the market, says VK Vijayakumar, chief investment strategist at Geojit Financial Services. "As long as the Fed and ECB remain dovish, more flows can be expected into the market, which can impart resilience to the market. However, high valuation of markets remain an area of concern," he added.
Markets view - Geojit Financial Services
"Since this important event (RBI) is behind us, the market trend, going forward, will be influenced by the capital flows into the market. So long as the Fed and ECB remain dovish, more flows can be expected into the market, which can impart resilience to the market. However, high valuation of markets remain an area of concern," says VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Some analysts expect further rate cuts from RBI if inflation stays benign
Some analysts expect RBI to lower rates further during this year, if inflation stays benign. VK Vijayakumar, chief investment strategist at Geojit Financial Services, said: “A key takeaway from the policy is the projection of benign inflation for FY2020. Since the GDP growth rate for FY2020 has been lowered in this benign inflation scenario, one can expect more rate hikes probably two more this year. The stance has been maintained at neutral perhaps in the context of the rising crude price and concerns regarding a below normal monsoon."
Amara Raja Batteries shares off highs
Shares of Amara Raja Batteries were off their day's highs and dipped into the red in noon trade. Shares were down 2% at ₹660 after hitting ₹700 at day's high. The Galla Family has agreed to buy 2% stake of Amara Raja from Johnson Controls, the company said.
Markets pricing in 25-bps cut: Neeraj Dewan
"Markets have already priced in a 25-basis-point cut, so now it will depend on the tone of the policy," said Neeraj Dewan, a director with Quantum Securities. "If RBI cuts 25 bps and signals further rates cuts down the line this year, it would be seen as positive for the markets." The market is expecting a cut in policy rates by 25 basis points, along with a change in policy stance to accommodative from neutral.
Weak demand drags March services growth to six-month low: PMI
India's dominant services industry last month grew at its slowest pace since September, hampered by a weaker expansion in domestic demand that dragged the pace of hiring to a six-month low, a private survey showed. The Nikkei/IHS Markit Services Purchasing Managers' Index fell to 52.0 in March from 52.5 the previous month but remained above the 50 mark separating growth from contraction for a 10th consecutive month.
Godrej Properties rises 2% after announcing JV to build sea-facing flats in Mumbai's Bandra
Godrej Properties on Wednesday announced that it has entered into a joint venture with a developer to develop a 4.25 acres sea-facing property in the prime suburban micro-market of Sandra West, Mumbai. The project will offer approximately 1 lakh square meters (approximately 1.1 million square feet) of saleable area and will be developed as a luxury residential project.
Indiabulls Housing Finance extends gains
Indiabulls Housing Finance on Wednesday said it has raised ₹17,300 crore in the March quarter of 2018-19 and plans to borrow ₹26,000 crore in the current financial year. "To deliver 17-19 per cent profit after tax (PAT) growth in the current financial year, the company plans to raise a net total of ₹26,000 crores in the four quarters of the current financial year," it added. The company's cash and cash equivalents as on March 31, 2019 stood at ₹27,512 crore, it said. Shares of the company were up 2% today, extending their 4% gains posted on Wednesday.
US-China talks made "good headway", could be extended
Trade talks between the United States and China made "good headway" last week in Beijing and the two sides aim to bridge differences during talks that could extend beyond three days this week, White House economic adviser Larry Kudlow said.
He said China had recognised problems for the first time during the talks that the United States has raised for years.
Negotiations continued in Washington on Wednesday after meetings last week in Beijing, spearheaded by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. US President Donald Trump will meet with Vice Premier Liu He, who is leading the Chinese side in the talks.
Rupee dips against US dollar ahead of RBI policy
Indian rupee weakened marginally against US dollar ahead of the key Reserve Bank of India's bi-monthly policy today due at 11.45 am. The rupee was trading at 68.64 a dollar, down from its previous close of 68.43. The home currency opened at 68.54 a dollar.
Expect consolidation to continue in near term: Jayant Manglik
Jayant Manglik, president of retail distribution at Religare Broking: "We expect consolidation to continue in the near term. Tomorrow’s RBI monetary policy would provide further direction to the markets. Soft inflation and muted domestic macro data have increased probability of a rate cut. Further, MPC’s commentary on future interest rate and inflation trajectory would be closely monitored by the market participants."
Tech view: 11,700–11,760 are levels to watch out for
For today's session, "11,620 followed by 115,70 would be seen as immediate supports. Any decline towards these levels is likely to get bought into and hence, we still continue with our buy on dips strategy. On the higher side, 11700–11760 are the levels to watch out for," says Sameet Chavan, chief analyst for technical and derivatives at Angel Broking.
Oil prices edge lower but still near $70
Oil prices dipped today, with Brent edging away from the psychologically important $70 level after easing in the previous session on data showing a surprise build in U.S. inventories. Brent futures eased 2 cents to $69.29. On Wednesday, Brent dipped 6 cents, after touching $69.96, the highest since November 12, when it last traded above $70. (Reuters)
Asian shares near 8-month, US-China trade talks in focus
Asian shares held on near eight-month high today as investors awaited developments on the 9th round of China-US trade talks that started in Washington. Overnight, Wall Street edged higher to extend a strong start to the quarter as a rally. Dow rose 0.15%, while the S&P 500 gained 0.21% and the Nasdaq 0.6%.