Domestic stocks dropped sharply as investors booked profits after the Reserve Bank of India (RBI) cut repo rate by 25 basis points, as expected, and changed policy stance to accommodative from neutral. The barometer index, the S&P BSE Sensex, lost 553.82 points or 1.38% at 39,529.72. The Nifty 50 index lost 177.90 points or 1.48% at 11,843.75. Shares of index heavyweights L&T, Reliance Industries and HDFC dropped.
Indices were trading with small losses in early trade as trading resumed after a public holiday on Wednesday. Key indices extended decline triggered in early trade on selling pressure in index pivotals. The Sensex fell below the psychological 40,000 level while the Nifty declined below the psychological 12,000 level. Stocks were trading on a weak note in mid-morning trade. Stocks extended slide in early afternoon trade after the central bank cut repo rates by 25 basis points, as expected. Selling frenzy in index pivotals dragged the key indices to day's low in mid-afternoon trade. Indices cut losses in late trade.
The S&P BSE Mid-Cap index fell 1.77%. The S&P BSE Small-Cap index declined 1.6%. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, was weak. On the BSE, 761 shares rose and 1837 shares fell. A total of 134 shares were unchanged. Breadth was strong in early trade.
Shares of index heavyweights L&T (down 3.41%), Reliance Industries (down 1.78%) and HDFC (down 1.65%) declined.
Infosys rose 0.44%. Infosys during market hours today, 6 June 2019 announced a collaboration with Microsoft to deliver smart buildings and spaces (SB&S) solutions for the architecture, engineering, construction, facilities management and real estate development markets. Leveraging the latest digital technologies, the solutions aim to improve the entire lifecycle of building construction and operations, and the user experiences of those that manage and work in buildings.
Aurobindo Pharma declined 4.56% after the company said it has received 10 observations from the US health regulator for its Unit 3 in Hyderabad. Aurobindo Pharma clarified that the United States Food and Drug Administration (USFDA) had conducted an inspection at the company's Unit III, a formulation manufacturing facility located at Bachupally, Hyderabad from 13 May 2019 to 24 May 2019. In this regard, the company has received a Form 483 with ten observations. None of the observations are repetitive and are more procedural in nature. The company will be responding to the USFDA within the stipulated time. The Form 483 will not have an impact on existing business of this facility.
On the economic front, the Reserve Bank of India (RBI) concluded its three-day Monetary Policy Committee (MPC) meeting today, 6 June 2019. On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.75% from 6% with immediate effect.
Consequently, the reverse repo rate under the LAF stands adjusted to 5.50%, and the marginal standing facility (MSF) rate and the Bank Rate to 6%. The MPC also decided to change the stance of monetary policy from neutral to accommodative.
These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth, RBI said in a statement.
Overseas, European stocks were trading higher on Thursday, as investors are awaiting the latest decision from the European Central Bank (ECB).
Asian shares were trading mixed Thursday as investors kept a close watch on impending US tariffs on Mexico while trade talks with Beijing remained at a standstill. South Korean markets were closed for a holiday.
American and Mexican officials said late Wednesday that progress was being made at immigration talks at the White House, but President Donald Trump tweeted that it was not nearly enough.
US stocks closed solidly higher Wednesday, after volatile morning trade that saw benchmarks flipping between gains and losses, as investors digested a round of conflicting economic data that showed strength in the U.S. services sector but signaled a potential weakening of the labor market.
In economic data, the Institute for Supply Management services sector index came in at 56.9%, compared with April's 55.5%. The Federal Reserve released its beige book for April through mid-May, which described the U.S. economy as expanding at a modest pace overall, though it also reported anecdotal evidence that labor shortages and new tariffs are holding back growth.
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