Sensex tanks 661 pts on RBI’s cautious stance, drought fears
Mumbai: The benchmark BSE Sensex plunged by 661 points today to 27,188.38 as RBI took a cautious stance on the economic recovery even as it cut policy rates by 25 bps, while forecast of a deficient monsoon added to the rout.
The Reserve Bank cut interest rate by 0.25 per cent for the third time this year but hinted there may not be any more cuts in the near-term sending stock markets in a tizzy.
Inflation, however, still remains a worry for the bank as it expects price rise to remain subdued till August before rising to 6 per cent by January 2016.
Meanwhile, monsoon is expected to be “deficient” as the Met department today gave “below normal” forecast for rains in the country which is likely to trigger fears of a drought.
Rate sensitive — realty, banking and auto — suffered the most as selling remained unabated throughout the day.
“RBI expects the inflation to tick higher from here owing to higher oil prices, below normal monsoon, and fall in crop output. The rise in input costs may further impact the profitability of the already ailing India Inc,” said Hiren Dhakan, Associate Fund manager at Bonanza Portfolio.
After opening in positive terrain, the 30-share index touched day’s high of 27,902.53.
It gave up initial gains and slipped into negative zone just after RBI monetary policy and nosedived to hit day’s low of 27,146.68 before settling at 27,188.38 points, down 660.61 points or 2.37 per cent
This is index’s biggest single day fall since May 6.
The wide-based NSE Nifty slipped below the crucial 8,300-level by plunging 196.95 points or 2.34 per cent to settle at 8,236.45. Intra-day, it shuttled between 8,445.35 and 8,226.05
“Adding to pessimism, Indian Meteorological Dept (IMD) latest report on monsoon indicates delay and downgrade in monsoon forecast, further dampened the sentiments,” said Jayant Manglik, President-retail distribution of Religare Securities.
Furthermore, weakness in the rupee which fell by 26 paise to Rs 63.96 (intra-day) against the dollar also weighed on the sentiments.
Barring Airtel, all Sensex stocks ended in red.
Among rate Rate sensitive scrips, SBI topped the list by falling 4.28 per cent, followed by Axis Bank by 4.20 per cent, ICICI Bank lost 3.70 per cent, HDFC 3.55 per cent and HDFC Bank 2.65 per cent.