The News International Team
The market reversed all its gains on Friday, reacting to the fears that rate cut cycle may get stopped due to rise in CPI inflation. The Sensex shed more than 680 points from day’s high. However, the index had climbed 253 points in morning trade today following clearance to Insurance Bill by Rajya Sabha.
The 30-share BSE Sensex fell 427.11 points or 1.48 percent to close at 28503.30 and the 50-share NSE Nifty dropped 128.25 points or 1.46 percent to 8647.75.
The broader markets plunged too, the BSE Midcap and Smallcap indices were down 1.4 percent and 1.5 percent, respectively. More than two shares declined for every share advancing on the Bombay Stock Exchange.
The consumer price index (CPI) rose to 5.37 percent in February against 5.11 percent in the previous month mainly due to a spike in food inflation (6.7 percent) with vegetables registering the sharpest rise. Even the CPI data for March is likely to increase further on the back of country-wide unseasonal rains that impacted Rabi crops.
“It is not such a comfortable number as to guarantee a rate cut in April specially since the Reserve Bank of India (RBI) has moved [recently],” JPMorgan economist Sajjid Chenoy said. The RBI cut repo rate by 50 basis points to 7.5 percent in 2015.
As far as the equity market is concerned, market expert, Anand Tandon says: “I don’t know whether it will be a major negative but the fact that the trend is reversed a bit would certainly not be good news. This time when the market is looking for more positives than negatives this is one more drag on the market at least.”
Meanwhile, the industry output data (IIP) for January came in at 2.6 percent against 3.2 percent in previous month.
Insurance companies got a further boost after the Rajya Sabha passed Insurance Laws (Amendment) Bill, 2015 yesterday. Foreign ownership limit in sector hiked to 49 percent from 26 percent. Experts believe this will attract more foreign money, may be more than Rs 50,000 crore in insurance sector. Max India and Reliance Capital fell 3-4 percent due to market sentiment.
For the week, the Sensex and Nifty tanked 3.2 percent each, the biggest weekly loss in the current calendar year. The sentiment dented by US rate hike fears and low hopes for further rate cut in India post February CPI inflation.
Today, the Indian rupee also saw major selling pressure following weakness in equity markets. The currenty declined 46 paise to 62.96 a dollar.
Banks, FMCG, capital goods, pharma and auto stocks pulled the market lower. Bank Nifty dropped 2 percent as ICICI Bank, Axis Bank and State Bank of India were down 2-2.5 percent while rival HDFC Bank fell over a percent.
Capital goods majors Larsen & Toubro and BHEL tanked over 3 percent. ITC was down 2 percent as Karnataka Government raised value added tax on cigarette and bidi between 17 to 24 percent.
Bajaj Auto lost 2.6 percent after brokerage house CLSA maintained underperform rating on the stock, citing structural as well as cyclical headwinds. Tata Motors slipped 1.2 percent on a 5.9 percent decline in Jaguar Land Rover February retail sales.
Among others, Reliance Industries, TCS, Sun Pharma, HUL, Wipro, Cipla, Hindalco, Tata Steel, Tata Power and Sesa Sterlite were down 1.5-2.6 percent. However, ONGC and Bharti Airtel advanced over half a percent.
DLF surged 6 percent as Securities Appellate Tribunal quashed SEBI’s order on DLF. Managing Director Rajiv Talwar says it is a big relief. “We will look to tap capital markets soon,” he adds.
Asian markets were upbeat today. Japan’s Nikkei gained 1.3 percent, closing above 19000-mark and Shanghai rose 0.7 percent. European markets traded flat (at 16 hours IST).