Markets plunge on poor GDP forecast
After swinging 770 pts, the Sensex ends 1.14% lower
MUMBAI: Stock market benchmark BSE Sensex plummeted by 434 points, or 1.14%, on Friday due to heavy losses in banking and FMCG stocks despite a 25 basis point (bps) cut in the key policy rate by the Reserve Bank of India (RBI), which also slashed the growth outlook for this fiscal.
After opening nearly 300 points higher, the 30-share index gave up all the gains to turn negative shortly after the policy announcement by the Reserve Bank of India (RBI).
After gyrating 770 points during the day, the 30-share Sensex ended 433.56 points or 1.14% lower at 37,673.31. It hit an intraday low of 37,633.36 and a high of 38,403.54.
The broader NSE Nifty plunged 139.25 points or 1.23% to close at 11,174.75.
During the holiday-truncated week, Sensex plummeted 1,149.26 points or 2.96%, while Nifty declined 337.65 points or 2.93%.
In its fourth bimonthly policy review of this fiscal, the central bank reduced its benchmark lending rate by 0.25 percentage point to 5.15% to revive growth that hit a six-year low of 5% in the June quarter.
The RBI also lowered its growth forecast for 2019-20 to 6.1% from 6.9% earlier and affirmed commitment to remain accommodative to address growth concerns “as long as necessary”.
“Despite the rate cut and the dovish commentary, equity market has reacted negatively, especially banks. That’s because of the RBI’S focus on quick transmission of lower interest rates would put pressure on margins of banks,” Gaurav Dua, senior vice
AFTER OPENING NEARLY 300 POINTS HIGHER, THE SENSEX GAVE UP ALL GAINS TO TURN NEGATIVE AFTER RBI ANNOUNCEMENT
president and head of capital market strategy and investments, Sharekhan by BNP Paribas, said.
“Also, the economic growth outlook remains concerning despite the 135bps policy rate cuts in 2019 and there is limited elbow room with RBI now to further take monetary actions to support the economy,” he added.
Vinod Nair, head of research at Geojit Financial Services, commented that despite the RBI’S and the government’s synchronised efforts to offset a slowdown in the economy, investors have taken a pessimistic view due to continued downward revision in gross domestic product (GDP) estimate and new stress in the banking system.
Top laggards in the Sensex pack included Kotak Bank, ICICI Bank, HDFC Bank, Tata Motors, Larsen & Toubro, State Bank of India, Tata Steel and Axis Bank, which dropped up to 3.46%.
On the other hand, Tata Consultancy Services, Infosys, ONGC, Tech Mahindra, Indusind Bank and NTPC rose up to 1.03%.
Rate-sensitive banking stocks faced the heat, with the BSE bankex, finance, auto and realty indices tanking up to 2.45%.
Broader BSE Midcap and Smallcap indices followed Sensex, shedding up to 0.94%.
Overall market breadth was negative with 1,636 scrips ending with losses and 976 posting gains on BSE. As many as 256 stocks hit their 52-week low levels while 346 scrips hit the lower circuits.