Volatility ruled the roost in mid-morning trade as the key benchmark indices reversed steep intraday losses to hit intraday high in positive zone after the Reserve Bank of India (RBI) surprised the financial markets by announcing a steeper-than-expected rate cut. At 11:15 IST, the barometer index, the S&P BSE Sensex, was up 25.53 points or 0.1% at 25,642.37. The 50-unit CNX Nifty was up 5.75 points or 0.07% at 7,801.45. Earlier, the Sensex hit three week low when it dropped 329.51 points at the day's low of 25,287.33 in mid-morning trade. The Nifty also hit its lowest level in over 2-1/2 weeks when it fell 104.50 points at the day's low of 7,691.20 in mid-morning trade.
The market breadth indicating the overall health of the market was weak. On BSE, 1,226 shares declined and 807 shares rose. A total of 107 shares were unchanged. The BSE Mid-Cap index was off 0.11%. The BSE Small-Cap index was off 0.25%. Both these indices underperformed the Sensex.
The Reserve Bank of India (RBI) surprised the financial markets by announcing a steeper-than-expected cut in the policy repo rate under the liquidity adjustment facility by 50 basis points to 6.75% at its fourth bi-monthly monetary policy review for the year 2015-16 today, 29 September 2015. The RBI has kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liability (NDTL). The RBI marked down slightly the FY16 gross domestic product (GDP) growth target to 7.4% from 7.6% earlier as global growth and trade were slower than initial expectations, a continuing lack of appetite for new investment in the private sector, the constraint imposed by stressed assets on bank lending and waning business confidence.
In overseas markets, Asian stocks dropped to 3-1/2-year lows following sharp losses on Wall Street after weak Chinese data rekindled worries about its fragile economy. US stocks settled yesterday, 28 September 2015 at their lowest levels since late August as concerns about slowing economic growth in China and mixed domestic economic data unnerved investors.
Bank stocks reversed intraday fall in volatile trade after the RBI surprised the financial markets by announcing a steeper-than-expected cut in repo rate by 50 basis points to 6.75% at its fourth bi-monthly monetary policy review for the year 2015-16 today, 29 September 2015.
Among private bank stocks, Kotak Mahindra Bank (up 0.72%), Axis Bank (up 0.12%), Federal Bank (up 1.72%), HDFC Bank (up 1%), IndusInd Bank (up 1.01%) and Yes Bank (up 0.86%) edged lower. ICICI Bank fell 1.23%.
Among PSU bank stocks, IDBI Bank (up 3.98%), Bank of India (up 1.1%), State Bank of India (up 1.25%), Union Bank of India (up 2.56%), Allahabad Bank (up 0.91%), Andhra Bank (up 0.67%), Punjab National Bank (up 0.74%), and Bank of Baroda (up 2.2%) edged higher.
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IT stocks rose as rupee dropped against the dollar. TCS (up 0.75%), HCL Technologies (up 0.68%) and Wipro (up 0.12%) gained. Tech Mahindra declined 1.08%.
Infosys rose 0.6% on media reports the company has partnered with US-based venture capital firm Vertex Ventures US Fund I LP to boost its access to start-ups focused on new-age technologies. Infosys Innovation Fund has an outlay of $500 million, reports suggested. Vertex Ventures has already invested in four early-stage start-ups, including California-based storage start-up Hedvig, and Silicon Valley-based cloud security start-up PerimeterX, as per reports
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 66.16, compared with closing of 66.04 during the previous trading session.
A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
In overseas markets, concern over a slowdown in China, the world's second-largest economy, and its potential impact on the US Federal Reserve's plans to normalize monetary policy after years of rock-bottom rates, has fueled market volatility in recent weeks. In China, data yesterday, 28 September 2015 showed industrial profits dropping the most in at least four years.
US economic data released yesterday, 28 September 2015 showed household spending climbed more than forecast in August and incomes also rose as the biggest part of the US economy continued to power past a global slowdown. Separate data showed contract signings to purchase previously owned US homes unexpectedly declined in August for just the second time this year, signaling residential real estate might have difficulty building on recent momentum.
Meanwhile, Federal Reserve Bank of New York President William C. Dudley reportedly said yesterday, 28 September 2015 the central bank will probably raise interest rates later this year despite uncertainties over global growth.
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