A benchmark index of Indian equities markets plunged 116 points or 0.40 percent, as the central bank decided to keep key interest rates unchanged in its fifth bi-monthly policy review of the current fiscal.Reserve Bank of India (RBI) Governor Raghuram Rajan said that a change in the monetary policy at the current juncture will be premature and that he will wait for the decrease in inflation to continue.However, he also mentioned the possibility of a rate cut early next year if the current downturn in inflation momentum continues.He even predicted an interest rate reduction outside the policy review cycle."The policy is lead by the data we are receiving and we need to be relatively sure that there is a moderation in inflation. We don't want any flip-flop in the future. Inflation is not a one way street," Rajan said.
The move by the RBI resulted in heavy selling in auto, information technology (IT) and oil and gas sectors, while healthy buying was observed in healthcare, metal and capital goods.The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 28,522.46 points, closed at 28,444.01 points, down 115.61 points or 0.40 percent from the previous day's close at 28,559.62 points.The Sensex touched a high of 28,576.39 points and a low of 28,386.46 points in the intra-trade.The markets were hoping against hope for a rate cut by the apex bank, however the expectations were left high and dry, even as recent economic data showed easing inflation coupled with slow economic expansion.
"Today we have seen correction in banks and auto stocks. In the same time we have seen stability in metal stocks in possibility of stimulus in Europe, European Central Bank (ECB) next policy meet is on Dec 4th," said Vinod Nair, head- fundamental research, Geojit BNP Paribas Financial Services.Dipen Shah had of private client group research, Kotak Securities said that biggest surprise in today'’ policy announcement was confirmation of a potential rate cut in first quarter of 2015."The question now is the magnitude of possible rate cuts going forward. We believe, RBI is likely to introduce Jan'’7 inflation target of five percent in April'’5 policy," Shah said.
Meanwhile, the S&P BSE auto index plunged by 201.81 points, IT went down by 167.20 points and oil and gas index which slipped by 69.99 points. However, healthcare index gained by 140.76 points, metal index was higher by 132.76 points and capital goods index moved up by 117.57 points.The wider 50-scrip Nifty of the National Stock Exchange (NSE) also closed trade in red. It was down 31.20 points (provisional) or 0.36 percent at 8,524.70 points.The major Sensex gainers were: Hindalco Inds, up 2.51 percent at Rs.171.40; Bharti Airtel, up 1.76 percent at Rs.384.30; Larsen and Toubro (L&T), up 1.12 percent at Rs.1,639.90; Sesa Sterlite, up 1.10 percent at Rs.229.20; and ICICI Bank, up 0.74 percent at Rs.1,770.55.The major Sensex losers were: Gail, down 2.85 percent at Rs.465.35; Mahindra and Mahindra, down 2.36 percent at Rs.1,265.55; Infosys, down 2.18 percent at Rs.2,127.95; HDFC, down 1.51 percent at Rs.1,121; and Tata Consultancy Services (TCS), down 1.38 percent at Rs.2,656.05.