Sensex down over 250 points; RBI cut repo rate by 25bps

The Sensex was down over 250 points and the Nifty was down 88 points with bank shares leading the fall

Markets slipped further after the RBI at its monetary policy review cut the repo rate by 25bps which was in line with market expectations. Bank shares were among the top losers.

The RBI has reduced the repo rate by 25 bps to 7.25% and kept the CRR unchanged at 4%.

At 11:05AM, the 30-share Sensex was down 255 points at 27,593 and the 50-share Nifty was down 76 points at 8,357.
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(Updated at 10:35AM)

Benchmark indices continue to trade lower with rate sensitive stocks losing sheen on the bourses despite hopes of a rate cut.

Losses in ITC on reports stating ban of sale of loose cigarettes coupled with weakness in select auto shares with Hero Motocorp losing the most on weak May sale numbers have dragged the indices lower.

At 10.35 AM, the Sensex is trading at 27,673 levels down by 176 points and the Nifty is quoting at 8,378 mark lower by 56 points.

Meanwhile, output in the eight key infrastructure industries which declined in April for a second month in a row, by 0.4% this time and weakness in the Asian peers as investors remain wary after the upbeat economic data from the US raised the possibility of a interest rate hike by the US Federal Reserve have dampened the sentiments.

Among individual stocks, Bank of Baroda, IndusInd Bank, Kotak Mahindra Bank and Canara Bank lost between 0.6% to 1.5% in morning trade on the National Stock Exchange (NSE). Hero MotoCorp, Apollo Tyres, Bajaj Auto and Maruti Suzuki; Prestige Estates, Sobha, Indiabulls Real Estate and Delta Corp from the realty pack are some of the top losers in the auto and realty sectors, respectively.

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(updated at 10.35 AM)

Markets have extended losses in the early trades weighed down by Index heavyweights with ITC contributing the most to the losses on reports stating ban on sale of loose cigarettes.

Meanwhile, investors are keenly awaiting for a rate cut from the central bank in the RBI monetary policy due later during the day order to revive the ailing economy. 

At 9.40 AM, the Sensex is trading at 27,708 levels down by 141 points and the Nifty is quoting at 8,390 mark lower by 43 points.

In the broader market, BSE Midcap and Smallcap indice are down 0.3% and 0.2% each.

EXPERT VIEWS

Techncial analysts suggest that the Nifty has entered a zone of uncertainty and would now closely track price action around 8,500 – 85,50 levels. 

"On the lower side, 8270 would now be an immediate support for the index. A sustainable move below this level may result in an immediate correction towards 8180 – 8120 levels. Going forward, we advise traders not to trade aggressively until they get clear direction and it’s advisable to follow strict stop losses," points out a morning note from Angel Broking.

On the economic front, growth in the crucial core industries came in as a disappointment in the new fiscal, analysts said, with April being the second month of contraction with continued weakness in the demand led industries of steel and cement. 

"While on one hand coal block allocation is resulting in encouraging growth numbers, on the other hand the slowdown in electricity growth has finally turned into an outright contraction. We would expect the situation to improve going forward and expect the core industries to pick up meaningfully in the second half of the fiscal as more infrastructural projects get off the ground.” said Rishi Shah, an economist with Deloitte.

On the macro-economic front, output in the eight key infrastructure industries declined in April for a second month in a row, by 0.4% this time.

The market participants would keenly await for the progress of monsoons. The southwest monsoon, the lifeline of millions of farmers is now expected to hit the Kerala coast only around June 5, almost four days behind the usual onset on June 1.

KEY STOCKS

On the sectoral front, BSE FMCG, Bankex, Power indices are losing sheen in the early trades and are down between 0.1-0.5%. However, BSE IT and Healthcare indices are trading higher by 0.3% each.

Among auto stocks, Bajaj Auto and Hero Motocorp are declining across the bourses on account of weak auto sales numbers for the month of May. Hero Motocorp is down over 2% and Bajaj Auto has shed 0.4%.

Index heavyweight and cigarette maker ITC has lost nearly 1.5% on ban of sale of loose cigarettes.

Among financials, HDFC twins, ICICI Bank and SBI are trading with marginal losses ahead of the RBI policy review.

BHEL continues its upward march after winning orders worth Rs 369-crore order for supply and installation of a power cycle piping (PCP) package for Barh project of NTPC. However, NTPC is trading lower by 1%.

Reliance Industries and Pioneer Natural Resources have entered into an agreement with North America-based Enterprise Products Partners to sell their stakes in Eagle Ford Shale (EFS) Midstream for $2.15 billion. However, shrugging off the posaitive news, RIL is trading lower by 0.5%.

On the gaining side, Tata Motors is trading higher by 0.5% on robust sales numbers for the month of May and Sun Pharma has rebounded after losing 9% in yesrterday's trade on value buying after the company entered into a distribution services agreement with AstraZeneca Pharma India AZPIL in India for AstraZeneca's brand “Axcer”, a new brand of ticagrelor, a drug used for the treatment of acute coronary syndrome (ACS).

GLOBAL MARKETS

US stocks began the month with modest gains after the data. Consumer spending remained flat in April, but construction spending and manufacturing gained momentum, backing the view that the U.S. central bank is on track to begin to hike rates later this year.

The dollar tested a 12-1/2-year peak against the yen on Tuesday after a spate of mostly upbeat US data reinforced expectations that the Federal Reserve would raise interest rates this year, while Asian shares were little changed.

MSCI's broadest index of Asia-Pacific shares outside Japan was down in early trade, while Japan's Nikkei stock index edged up about 0.1%.

With Reuters input