MARKETS SINK ON RBI’S BEARISH OUTLOOK ON RATE

In a highly volatile trading session, the markets retreated from their threemonth high led by interest rate sensitive banking, auto and real estate sector stocks after the Reserve Bank of India (RBI) cautioned that the room for further monetary policy easing is limited.

The Sensex closed 19,575.64, sliding 160.13 points or 0.81 per cent while the Nifty dropped 55.35 points or 0.92 per cent to end the week at 5,944.

“The RBI governor’s caution on further rate cuts perhaps was a bit too much for the market and the indices fell like a pack of cards after the policy announcement.

Hopes of a 50 basis point cut in repo rate and 25 basis point cut in CRR rate had fuelled a rally in banking and other rate sensitive stocks during the past couple of trading session,” observed Amar Ambani, head of research, India Infoline.

As the rate cut fell short of market expectations, banking stocks like ICICI Bank, State Bank of India (SBI) and HDFC Bank witnessed heavy selling post RBI announcement.

Among the sectoral indices, BSE Bankex was the biggest loser down 2.40 per cent while auto and realty index fell 1.50 per cent and 1.39 per cent respectively.

However, FIIs remained net buyers of Indian equities to the tune of `953.95 crore while their domestic institutions sold shares worth `792.78 crore, the bourses data showed.