The benchmark index of Indian equities markets closed Tuesday's trade down 122.13 points or 0.42 percent, as investors' sentiments were subdued after the Reserve Bank of India (RBI) decided to keep key interest rates unchanged in its sixth bi-monthly policy review.Initially after the RBI announcement the markets tumbled by 221.86 points, but later pared some of the losses.Heavy selling was observed in the interest sensitive banking and automobile sector. Other sectors such as healthcare, realty and power stocks too came under selling pressure.However, oil and gas, fast moving consumer goods (FMCG), metal, consumer durables and technology, entertainment and media (TECK) sectors made healthy gains.
The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 29,217.40 points, closed the day's trade at 29,000.14 points, down 122.13 points or 0.42 percent from the previous day's close at 29,122.27 points.The Sensex touched a high of 29,253.06 points and a low of 28,900.41 points in the intra-trade during the day.In its sixth bi-monthly policy review, the Reserve Bank of India kept the repo rate, or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, unchanged at 7.75 percent.
Consequent to the RBI's decision, the reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, remained at 6.75 percent.The status quo in these key policy rates mean that the equated monthly instalments (EMIs) on home, auto and other loans would remain unchanged.On the liquidity front, the RBI reduced the statutory liquidity ratio (SLR) which is the mandatory amount of cash, gold, bonds or other securities that banks must keep with it. The SLR has been reduced by 50 basis points to 21.5 percent of their net demand and time liabilities (NDTL) effective from the fortnight beginning Feb 7, 2015.
The reduced SLR will help inject additional capital into the financial system. The Cash Reserve Ratio (CRR) is left unchanged at 4 percent. The RBI's action was on expected lines as most analysts had predicted a status quo, considering the apex bank last month cut the repo rate."RBI event was on expected lines but correction in realty and financials signalled market's expectation for a rate cut," said Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial Services."Further, concerns over bank asset quality have weighed on financials, especially PSU banks. Ahead of the impending budget, Rajan has paved way for creating more liquidity in the system for banks to capitalize on a recovery in the cycle."
Nair added that the markets expect the budget to be the key in increasing corporate and household confidence to save, create more jobs and capex cycle revival.Sector-wise the S&P BSE banking index plunged 593.57 points, automobile index was down 131.66 points, healthcare index was lower by 143.25 points, realty index declined by 25.88 points and power index slipped 15.13 points.However, oil and gas index was up 200.57 points, FMCG index gained 85.98 points, metal index rose 80.93 points, consumer durables index was higher by 53.83 points and TECK index increased by 23.91 points.The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading flat. It was down 40.85 points or 0.46 percent at 8,756.55 points.
The major Sensex gainers were Sesa Sterlite, up 6.23 percent at Rs.210.55; Bharti Airtel, up 3.42 percent at Rs.371.85; Reliance Industries, up 3.25 percent at Rs.937.45; ONGC, up 2.64 percent at Rs.359.25; and Tata Consultancy Services (TCS), up 1.67 percent at Rs.2,554.80.The losers were Axis Bank, down 4.95 percent at Rs.586.50; Tata Power, down 4.12 percent at Rs.87.30; Bajaj Auto, down 3.74 percent at Rs.2,260.10; Mahindra and Mahindra, down 3.52 percent at Rs.1,200.05; and HDFC, down 2.98 percent at Rs.1,232.40.