Mumbai: The BSE benchmark Senxex on Tuesday plunged by 205 points to a five-week low as RBI not only held on to policy rates but also hiked provisioning norms and lowered growth projection, spooking investors who resorted to all-round selling, particularly in bank and realty stocks. Apparently not enthused by RBI policy, Finance Minister P Chidambaram, who had on Monday announced fiscal consolidation roadmap, said growth is as much a challenge as containing inflation and government would "walk alone" if it comes to that. But market sentiment remained low as investors were left poorer by a staggering Rs 70,000 crore after the market slump.
The Sensex, which was trading 82 points higher on hopes of rate cut, shed its gains within minutes of RBI Governor D Subbarao unveiled the policy review and fresh decisions. With 22 scrips ending with losses, the 30-share Sensex closed 204.97 points, or 1.10 per cent, down at 18,430.85, levels last seen on September 20.
"As expected RBI cut CRR by 25 bps while the decision to keep policy rates unchanged seems to have disappointed markets given recent government actions," said Sandeep Nanda, Chief Investment Officer, Bharti AXA Life Insurance. RBI maintained status quo on repo rate, cut GDP growth forecast for 2012-13 to 5.8 per cent from 6.5 per cent and increased inflation estimate to 7.5 per cent from 7 per cent.
Bank stocks invited investor wrath with the central bank raising the provision for restructured standard accounts to 2.75 per cent. SBI which fell a hefty 4.4 per cent was the worst performer in Sensex while ICICI bank and HDFC Bank also slipped in 1-2 per cent range.
"RBI hiked provisioning on restructured book by 75 bps which could impact profit before tax of banks from 0.1-9.0 per cent depending of existing stressed portfolio," said Dipen Shah, Head-PCG Research, Kotak Securities. Barring Maruti, auto stocks including Tata Motors, Hero MotoCorp and M&M fell in 1.6-3.5 per cent range as hopes of rate cut boosting demand in festival season were dashed.
On similar lines, the 50-share National Stock Exchange index Nifty fell by 67.70 points, or 1.19 per cent to end below key 5,600-level at 5,597.90. In the broader market, over 1,800 stocks including realty, consumer durables, capital goods and PSU stocks fell, while just 997 shares rose.
The Sensex had risen from 18,000 levels on September 13 to over 19,000 by October 4 with the government announcing a string of reform measures including diesel and LPG price hike, FDI in multi-brand retail, financial restructuring of discoms and FDI in insurance and pension sector, among others. With government on Monday announcing a fiscal consolidation plan that aims to bring the gap to 3 per cent of GDP by FY17, investors were disappointed on Tuesday as they had bet on a rate cut by RBI to reward the recent measures. "While inflation is an issue, a repo rate cut at this stage would have been... magic to turnaround sentiment radically, for investment in new projects, expansion and also for capital flow...," said Nirmal Jain, Chairman, IIFL.
Globally, indices in China, Singapore, South Korea and Taiwan ended higher while those in Hong Kong and Japan closed down. European markets were trading higher in the afternoon deals as some companies reported good earnings than estimated. France's CAC was up by 0.82 per cent, Germany's DAX by 0.84 per cent and the UK's FTSE by 0.68 per cent.
Back home, after SBI, Tata Motors, L&T , Hindalco, Jindal Steel, ICICI Bank, Tata Steel, Hero MotoCo, Gail India, M&M, ITC, Cipla, Coal India, Tata Power, NTPC, HDFC Bank and RIL dropped between 1.00-3.52 per cent range. However, Maruti Suzuki rose by 2.27 per cent, followed by Dr Reddy's Lab (1.58 pc), Infosys (0.99 pc) and HUL (0.80 pc). Among the sectoral indices, the Bankex dipped by 2.35 per cent, followed by BSE-Realty (2.28 pc), BSE-CD (2.26 pc), BSE-CG (2.09 pc), BSE-PSU (1.71 pc), BSE-Metal (1.52 pc), BSE- Auto (1.37 pc) and BSE-Power (1.00 pc).
The total market turnover was higher at Rs 2,184.19 crore from Rs 1,995.75 crore on Monday. Meanwhile, FIIs sold shares worth Rs 76.57 crore on Monday as per provisional data with stock exchanges.
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