The Reserve Bank of India’s 25 basis points cut in key repo rate failed to cheer the street and the benchmark indices plunged 1.50% in the wake of the monetary policy announcement . There was selling across the board, with leading banks and auto stocks among major losers.
The Bombay Stock Exchange’s Sensex lost 516.06 points or 2.03% to 24,883.59, and the wider NSE Nifty50 Index 155.6 points or 2.01% to close Tuesday at 7,603.20.
“The market was expecting at least 50 basis points interest rate cut. There was clear disappointment on that front Also, in the immediate-term the focus will be on corporate earnings, which are still expected to be poor,” said Vinod Nair, head – fundamental research, Geojit BNP Paribas Financial Services.
On the 30-share Sensex, only Lupin finished in the green, with a 0.12% rise. Adani Ports was the biggest loser, down 6.23%. Banking stocks were also under pressure with ICICI Bank and State Bank of India, among the country’s top lenders, down 5.4% each.
Other major losers included Tata Motors, BHEL, Tata Steel, Larsen and Toubro, Coal India and Bajaj Auto, which saw losses in the range of 2%-3% on the BSE.
Analysts say that the steps taken by the RBI to improve liquidity were positive, but would play out over the long-term and there were no immediate triggers that could boost the market.
“We feel the measures taken (to improve liquidity) would tantamount to more than a 25 bps repo rate cut. But this would take time to sink into the markets. This leaves little to celebrate in the immediate term, therefore the market offered a tepid reception the policy,” said Arun Gopalan, vice-president research at Systematix Shares and Stocks.
While the stocks were under pressure, the rupee rally continued for sixth day. Fresh dollar selling by exporters and banks and bearish dollar overseas, saw the rupee hit its highest level in 2016. It however pared intra-day gains towards the end of the day to just 2 paise above Monday’s closing of 66.21 to a dollar.
The rupee was trading around 66.19 levels in evening trade.