Sensex, Nifty dip 1% as RBI keeps repo rates unchanged for the sixth time

RBI Governor Shaktikanta Das said that it was premature to talk about rate cuts until there's evidence inflation will be kept firmly around the target level

Key benchmarks fell by 1 per cent on Thursday, dragged down by rate-sensitive financial stocks, after the Reserve Bank of India (RBI) kept rates unchanged for a sixth consecutive meeting and signalled that interest rates may not be lowered in a hurry.

Though keeping the rates unchanged was largely on expected lines, the RBI’s decision to maintain the “withdrawal of accommodation” dampened hopes of early rate cuts. Markets were expecting the central bank to shift its stance to neutral.

The S&P BSE Sensex ended the session at 71,428, with a decline of 724 points, or 1 per cent, while the National Stock Exchange Nifty50 closed at 21,718, down 213 points, or 0.97 per cent.

The Nifty Bank Index was down by 1.76 per cent, while the Nifty Financial Services Index fell by 1.85 per cent. The India VIX rose by 2.1 per cent to 15.83.

RBI Governor Shaktikanta Das further said that it was premature to talk about rate cuts until there’s evidence inflation will be kept firmly around the target level.

“Rate-sensitive sectors ended in the red after the RBI maintained status quo for the sixth consecutive time and did not provide any time frame for an interest rate cut. After the hawkish tone of the RBI, we expect the market to remain sideways and consolidate in the near term,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

Experts suggest that the RBI may be taking cues from the US Federal Reserve (Fed), which has played down expectations of a rate cut in March. The statements of four Fed officials on Wednesday suggested that they don’t see an urgent case for lowering interest rates, joining the many policymakers in recent days who made it clear that a cut is likely in May at the earliest.

The statements of Fed officials align with the message of Fed Chair Jerome Powell, who emphasised last week that the US central bank is ready to cut rates once it is sure about inflation heading to its 2 per cent target. Although equity investors have tempered their expectations of an early rate cut, a section still hopes for a cut in the Fed’s meeting in March.

The market breadth was weak, with 2,274 stocks declining and 1,575 gaining. More than two-thirds of Sensex stocks declined. ICICI Bank, which fell by 3.3 per cent, HDFC Bank, which fell by 1.8 per cent, and ITC, which fell by 4.04 per cent, were the biggest contributors to the Sensex decline.

Shares of ITC fell after its largest shareholder, British American Tobacco (BAT), said it was trying to overcome regulatory hurdles to sell at least part of its stake. Globally, BAT’s shares hit a four-year high after the news of its planned stake sale in ITC.

“The fresh decline in the private banking majors and select heavyweights like ITC has again pushed the Nifty to its crucial support zone of the short-term moving average, the 20-day exponential moving average. A decisive close below 21,600 would again put the bulls on the back foot. We thus suggest hedging the existing longs and waiting for clarity,” said Ajit Mishra, senior vice-president of Religare Broking.

Paytm shares tank 10% after 2-day breather 
 

Shares of One97 Communications Ltd, which owns the Paytm brand, fell by 10 per cent to hit lower circuit limit on Thursday, after a two-day rally in the stock fizzled out. Despite a firm beginning, the stock tanked 9.99 per cent to Rs 447.10 — its lower circuit limit — on the BSE. On the NSE, it tumbled 9.99 per cent to Rs 446.65 — its lowest trading permissible limit for day. The company’s market valuation eroded by Rs 3,153.18 crore to Rs 28,394.44 crore.

LIC MF launches Nifty Midcap 100 ETF
 

LIC Mutual Fund Asset Management on Thu­rs­day launched the LIC MF Nifty Midcap 100 ETF, its first new fund offering (NFO) post the merger in July 2023. The NFO closes on Febr­uary 12. The ETF, which will track the Nifty Midcap 100 TRI index, will get listed on exch­anges on February 19. Fund houses have laun­ched several active as well passive funds in the smallcap and midcap space in the re­cent months amid a surge in investor interest in this segment of the market. 

Capital Small Finance Bank IPO booked 1.19x on Day 2
 

The initial public offering (IPO) of Capital Small Finance Bank Limited on Thursday got subs­cribed 1.19 times (x) on the second day of bidding. The Rs 523 crore-initial share sale received bids for 9,715,520 shares against 8,147,373 shares on offer, according to NSE. Meanwhile, the IPO of Capital Small Finance Bank Limited got subscribed 1.19x and Rashi Peripherals IPO received 3.19x sub­scription on Thursday, the second day of bidding.