Sensex falls 112 points; RBI cautious on further rate cuts

MUMBAI Tue Jan 29, 2013 6:12pm IST

A terminal operator speaks on telephones at a local stock market in Chandigarh December 31, 2009. REUTERS/Ajay Verma/Files

A terminal operator speaks on telephones at a local stock market in Chandigarh December 31, 2009.

Credit: Reuters/Ajay Verma/Files

Related Topics



MUMBAI (Reuters) - The BSE Sensex fell to a one-week low on Tuesday, led by a decline in rate-sensitive stocks such as HDFC Bank, after the Reserve Bank of India (RBI) lowered its key policy rate, but made further rate cuts conditional on government moves to control fiscal deficit.

The RBI cut the policy repo rate by 25 basis points to help support an economy set to post its slowest annual growth rate in a decade, and even unexpectedly reduced the cash reserve ratio (CRR) to address the country's liquidity deficit.

The central bank stressed that halting a slide in growth had become critical, but it went on to list constraints, notably worryingly high current account and fiscal deficits, and the risk that inflation could flare again.

The cautious call led indexes to pull back after earlier hitting their highest in two years since January 2011 immediately after the RBI decision.

Analysts said the government's upcoming budget for the fiscal year starting in April would be key in determining the markets' near-term outlook.

"Policy was broadly in-line with market expectations, but there has been a sense of caution mainly due to widening current account deficit and inflation," said Kaushik Dani, Fund Manager at Peerlees Mutual Fund.

"The way budget pans out will determine how RBI formulates its March policy," added Dani.

The Sensex fell 0.56 percent, or 112.45 points, to end at 19,990.90, closing below the psychologically important 20,000 mark.

The index had earlier gained as much as 0.5 percent to its highest intraday since January 6, 2011.

The broader Nifty fell 0.41 percent, or 24.90 points, to end at 6,049.90, marking its lowest close in a week after earlier also hitting a two-year high.

RBI's caution comes ahead of what is expected to be a volatile week, with continued earnings results and the expiry of derivatives on Thursday, while the Federal Reserve is set to conclude its two-day meeting on Wednesday

Rate-sensitive stocks fell after the RBI made further rate cuts conditional on government's efforts towards fiscal consolidation, making hopes of aggressive easing cycle this year highly improbable.

Among banking stocks, HDFC Bank(HDBK.NS) fell 2.7 percent , while State Bank of India(SBI.NS) ended 1.2 percent lower.

Real estate developer DLF(DLF.NS) fell 1.2 percent, while Tata Motors(TAMO.NS) fell 1.4 percent.

Oil and gas stocks declined on profit-taking, with Oil and Natural Gas Corp Ltd(ONGC.NS) falling 0.5 percent, having gained 25 percent in January after the government's move to allow higher diesel prices and due to expected changes to gas pricing.

Reliance Industries(RELI.NS) fell 1.6 percent, marking its fourth day of losses, on fresh concerns over its gas output from KG D6 block, dealers say.

Century Textiles & Industries Ltd(CNTY.NS) shares ended 3.9 percent lower after the company reported a loss of 291.9 million rupees in Oct-Dec earnings.

However, among stocks that gained, Axis Bank(AXBK.NS) ended 4.4 percent higher as dealers cited good demand for a share sale of up to $1 billion.

Adani Ports and Special Economic Zone Ltd(APSE.NS) rose 6.6 percent after the company said it would sell a majority stake in Australia's Abbot Point port to the Adani family.

Adani Port's stake sale in its Australian port would reduce the Indian company's consolidated debt by around 110 billion rupees, while the reinvestment of the cash flows for domestic growth opportunities would be a positive, brokerage Edelweiss says in an email to clients.

Idea Cellular(IDEA.NS) shares ended 0.9 percent higher ahead of earnings, later in the day.

(Additional reporting by Manoj Dharra; Editing by Anand Basu)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared



Modi's U.S. Trip

Modi's U.S. Trip

PM Modi to get rock star reception in New York.  Full Article 

Northeast Floods

Northeast Floods

Landslides and floods kill 22 in northeast India.  Full Article 

Food Subsidy

Food Subsidy

India has no plans to increase food handouts - Food Minister Ram Vilas Paswan.  Full Article 

Importing Iron Ore

Importing Iron Ore

JSW Steel to import 10 mln T of iron ore due to local shortage.  Full Article 

Mars Mission

Mars Mission

India's Mars mission a step closer to success with engine test  Full Article 

Bumper Sales

Bumper Sales

Apple sells more than 10 mln new iPhones in first three days  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage