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    HomeBusinessSensex closes 215 pts lower, Nifty below 16,400

    Sensex closes 215 pts lower, Nifty below 16,400

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    Benchmark indices closed lower for the fourth day amid volatility on Wednesday after the Reserve Bank of India announced its decision to hike the policy repo rate by 50 basis points.

    The RBI’s monetary policy committee (MPC) has unanimously voted to increase the policy repo rate from 4.40 per cent to 4.90 per cent.

    Sensex and Nifty closed lower, dragged by FMCG, consumer durables, oil & gas and private bank stocks. 

    The BSE Sensex closed at 54,892.49, down 214.85 points or 0.39 per cent. It recorded an intraday high of 55,423.97 and a low of 54,683.30. The Nifty 50 closed at 16,356.25, down 60.10 points or 0.37 per cent. It recorded an intraday high of 16,514.30 and a low of 16,293.35.

    Market breadth

    The market breadth remained in favour of the decliners with 1,768 stocks declining on the BSE against 1,554 that advanced while 111 remained unchanged. Furthermore, 10 stocks hit the upper circuit as compared to six stocks that were locked in the lower circuit. Besides, 66 stocks touched 52-week high and 73 touched 52-week low.

    Tata Steel, State Bank of India, Titan, Dr Reddy and BPCL were the top gainers on the Nifty 50, while Bharti Airtel, ITC, Reliance, UPL and Aisan Paints were the top losers.

    Monetary policy review

    Markets reacted to the rate hike which comes in the backdrop of intensified inflationary pressures even as the economic growth is gaining momentum. The MPC voted unanimously to remain focused on the withdrawal of accommodation while supporting growth.

    The retail inflation projection for FY22 has been upped sharply to 6.7 per cent (taking into account average crude oil price at $105 per barrel) from 5.7 per cent even as GDP growth projection has been retained at 7.2 per cent.

    Prashanth Tapse, Vice President (Research), Mehta Equities Ltd said, “Markets failed to hold onto early gains and ended the day on a negative note post the RBI rate hike. Nifty ended in the red for the fourth consecutive day as RBI MPC hiked key interest rates by 50 basis points.”

    “The cynic FIIs at the moment are obsessed with the negativity surrounding Dalal Street in the backdrop of inflation concerns amidst spiking WTI oil prices at $120.97 a barrel. Also, bad news was that the Indian rupee hit a fresh low against the US Dollar despite Tuesday’s RBI intervention in the foreign exchange market,” added Tapse. 

    Ajit Mishra, VP-Research, Religare Broking Ltd said, “Markets witnessed a roller coaster ride and ended the session with a cut of nearly half a percent. The start was positive amid supportive global cues. However, choppiness after the MPC meeting outcome kept the traders on their toes till the end.” 

    “As the RBI policy is behind us, markets will take cues from global markets and upcoming macroeconomic data. We reiterate our cautious view citing a lackluster move in the index and suggest maintaining positions on both sides,” added Mishra. 

    Further rate hikes excepted 

    Analysts expect further rate hikes to curb inflationary pressures. However, a majority of factors including monsoon performance, its impact on the food prices, the effectiveness of the price control measures taken by the government and geopolitical factors will impact rate hikes. 

    Sujan Hajra-Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers said, “The measures today are consistent with sharply upwardly revised inflation and unchanged growth projections for the current financial year by the Reserve Bank.”

    “Also, continued high inflation, aggressive rate hike plans of the US Federal Reserve, strengthening of the US dollar and portfolio capital outflow from emerging market economies (including India) are factors which influenced the decision of the Reserve Bank of India. The central bank clearly is front-loading the monetary policy tightening to normalise the rate to the pre-pandemic level quickly,” added Hajra. 

    Dhiraj Relli, MD & CEO, HDFC Securities said, “The MPC policy actions’ impact on inflation will only materialise after couple of quarters. The RBI governor has hoped for more fiscal measures from the government to bring inflation under control faster.”

    “While the real GDP growth projection for FY23 is retained at 7.2 per cent based on the fact that drivers of domestic economic activity are getting stronger, they face headwinds from global spillovers in the form of protracted and intensifying geopolitical tensions, elevated commodity prices, Covid-19 related lockdowns or restrictions in some major economies, slowing external demand and tightening global financial conditions on the back of monetary policy normalisation in advanced economies. This number may come up for some downward revision in the forthcoming MPC meets.”

    “The bond markets and equity markets reacted well to the MPC outcome being relieved that the MPC did not sound more hawkish than most expectations,” added Relli.

    FMCG stocks under pressure

    On the sectoral front, while realty, PSU Bank and IT gained, FMCG, private banks, consumer durables and oil & gas dragged. 

    Nifty Realty was up nearly 2 per cent, while Nifty PSU Bank was up 0.71 per cent. Nifty IT was up 0.41 per cent.

    Nifty FMCG was down over 1 per cent at closing. Nifty Consumer Durables and Nifty Oil & Gas were down 0.55 per cent and 0.92 per cent, respectively. Nifty Private Bank was down 0.43 per cent.

    Broader market gains

    Broader indices, too, faced pressure. Nifty Midcap 50 was down 0.21 per cent, while Nifty Smallcap 50 was down 0.01 per cent. The S&P BSE Midcap was donw 0.15 per cent, while the S&P BSE Smallcap was down 0.33 per cent.

    The volatility index softened 2.87 per cent to 19.84.

    Published on June 08, 2022

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