Stock markets tumble 1% after RBI monetary policy decision; bank, auto stocks drag

Benchmark stock indices Sensex and Nifty tanked around 1 per cent on Thursday dragged by selling in banking and auto shares due to increased uncertainty about the timing of interest rate cuts after the RBI’s monetary policy decision.

Erasing all its early gains, the 30-share BSE Sensex fell by 723.57 points or 1 per cent to settle at 71,428.43. The barometer slipped into red after the announcement of the RBI monetary policy and hit a low of 71,230.62 thereafter, reflecting a loss of 921.38 points or 1.27 per cent.

The Nifty shed 212.55 points or 0.97 per cent to settle at 21,717.95.

The RBI Monetary Policy Committee on Thursday decided to keep policy rate unchanged for the sixth time in a row in view of global uncertainty and the need to bring down retail inflation to 4 per cent. The RBI also maintained its 'withdrawal of accommodative stance'.

Announcing the decision of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das on Thursday said it has decided to keep the policy repo rate unchanged on the basis of an assessment of the current and evolving macroeconomic situation.

MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth, he said.

"Though FY25 GDP growth forecast has improved, the RBI remains vigilant on inflation & banking liquidity. The incomplete transmission of the cumulative 250 bps and the inflation ruling above the target level add uncertainty about the timing of the interest rate reduction. The ripple effect was seen in the government 10 yr yield, which inched higher.

"A large pocket of the market slid into red like FMCG, banks, and auto. FMCG was impacted more by weak Q3 result and downgrade in volume growth, in the near-term, due to weak rural demand," said Vinod Nair, Head of Research, Geojit Financial Services.

Among the Sensex firms, ITC, Kotak Mahindra Bank, ICICI Bank, Nestle, Axis Bank, IndusInd Bank, UltraTech Cement, Bajaj Finance, Maruti and HDFC Bank were the major laggards.

State Bank of India, PowerGrid, Tata Consultancy Services, HCL Technologies and Reliance Industries were among the gainers.

In Asian markets, Seoul, Tokyo and Shanghai settled in the positive territory while Hong Kong ended lower.

European markets were trading in the green. The US markets ended with gains on Wednesday.

"The policy was largely on expected lines but preferred to remain cautious," Parijat Agrawal, Head – Fixed Income, Union Asset Management Company Pvt Ltd, said.

Global oil benchmark Brent crude declined 0.18 per cent to $79.07 per barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,691.02 crore on Wednesday, according to exchange data.

The BSE benchmark declined 34.09 points or 0.05 per cent to settle at 72,152 on Wednesday. The Nifty ended marginally up by 1.10 points or 0.01 per cent to 21,930.50.

Unchanged RBI key policy rate erases early gain in rupee, closed flat

The rupee settled on a flat note at 82.96 (provisional) against the US dollar on Thursday, after the Reserve Bank decided to keep the key policy rate unchanged for the sixth time in a row to maintain a tight vigil on inflation.

Forex traders said a negative trend in domestic equities weighed on investor sentiments.

At the interbank foreign exchange, the rupee opened at 82.94 against the dollar and moved in a narrow range and settled for the day at 82.96 against the American currency, as the central bank retained the repo rate at 6.5 pc for the sixth consecutive time.

During the day, the rupee touched an intraday high of 82.89 and a low of 83 against the US dollar.

On Wednesday, the rupee appreciated 9 paise to close at 82.96 against the dollar.

The Indian rupee remained flat as RBI maintained status quo in its monetary policy for the sixth consecutive time and left Repo Rate unchanged at 6.5 per cent, in line with street expectations.

The central bank revised FY24 GDP projections higher at 7.3 per cent from 7 per cent and projected FY25 GDP at 7 per cent. It also projected CPI (consumer price-based inflation) in FY25 lower at 4.5 per cent.

However, the rupee lost earlier gains as domestic markets declined and US dollar also recovered.

"We expect rupee to trade with a slight negative bias on expectations that US dollar may recover amid hawkish US Fed speak and geopolitical tensions," said Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas.

Israeli Prime Minister rejected a peace proposal by Hamas which may also lead to rise in crude oil prices.

However, positive global markets may support rupee at lower levels. Traders may take cues from weekly unemployment claims data from US and speeches by various Fed officials. USD-INR spot price is expected to trade in a range of Rs 82.70 to Rs 83.30.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das on Thursday said the Monetary Policy Committee (MPC) will remain watchful of food inflation so that the benefits gained are not frittered away.

The RBI on Thursday projected a Gross Domestic Product (GDP) growth of 7 per cent for 2024-25, which is lower than the 7.3 per cent expansion estimated for the current fiscal.

Das said rural demand continues to gather pace, urban consumption remains strong and investment cycle is gaining steam on the back of increased capex.

He said there are signs of revival in private investments.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03 per cent higher at 104.08.

Brent crude futures, the global oil benchmark, declined 0.18 per cent to $79.07 per barrel..

Brent crude declines

Crude oil futures on Friday declined 0.73 per cent to Rs 6,161 per barrel as participants trimmed their positions on low demand.

On the Multi Commodity Exchange, crude oil for February delivery fell Rs 45 or 0.73 per cent to Rs 6,161 per barrel with a business volume of 10,354 lots.

Globally, West Texas Intermediate crude oil traded 0.42 per cent higher at USD 74.13 per barrel, while Brent crude declined 0.18 per cent to $79.07 per barrel.