Sensex falls 644 points from top after hitting 30K on RBI rate cut
04 March 2015
Benchmark indices nosedived in the last hour of trade on Wednesday after touching record highs earlier in the day spurred by the 25 basis point repo rate cut.
The 30-share BSE Sensex shed 213 points to close at 29380.73, after hitting a new high of 30024.74 intraday. The 50-share NSE Nifty fell 73.60 points to close at 8922.65, after making a new peak of 9119.20.
Market players attributed the sudden crash to technical factors, saying investors would have been tempted to book profits after the steep rise over the last one week.
''The market is set for a steep correction, which could last a month or month and a half,'' said Jai Bala of cashthechaos.com, adding that the bull market was still intact.
The broader markets saw major fall compared to benchmarks, the BSE Midcap and Smallcap indices were down more than a percent. Declining shares outnumbered advancing ones by a ratio of 1894 to 1009 on the Bombay Stock Exchange.
Shares soared earlier in the session after the RBI announced a 25 basis points reduction in the benchmark repo rate before the market opened for trading. The current repo rate stood at 7.5 percent against 7.75 percent earlier while the central bank kept the cash reserve ratio at 4 percent.
RBI governor Raghuram Rajan said the move was prompted by the recent fall in consumer inflation, recorded at 5.1 percent in January, as well as the recent Union Budget, which had ''structural reforms embedded in it'' -- even though it extended the timeline to bring down the central government's fiscal deficit to 3 percent from two years to three.
Late sell-off in banks, metals, oil & gas, power and IT shares dragged the market down, while FMCG, pharma and realty shares held ground.
Sesa Sterlite, Hindalco Industries, Axis Bank, Tata Power and State Bank of India were the prominent losers, down 3-4 percent. HDFC Bank, Reliance Industries and TCS lost more than 1.5 percent.
However, Sun Pharma bucked the trend and maintained its strong upmove since morning. The stock gained 6.62 percent after its subsidiary Sun Pharma Advanced Research Company (SPARC) received US FDA approval for Elepsia XR extended release tablets, an anti-epileptic drug. SPARC was up 4.55 percent.
ITC and Bharti Airtel gained 0.6-0.9 percent.
Meanwhile, second round of coal auctions has been underway with 14 mines up for grabs. Usha Martin won the Brinda & Sasai block in Jharkhand for Rs 1,804 per tonne. The stock shot up 20 percent intraday, especially after this news but late sell-off dragged the stock to close flat.
Lok Sabha also passed the Coal Mines Special Provisions bill. All eyes are now on the bill's passage in the upper house.
Spectrum auction also began today with eight players battling it out for airwaves. Auctions believed to be make or break for business continuity for Vodafone, Idea Cellular and Bharti Airtel.
In the broader space, Eicher Motors gained 1 percent after showing a 5 percent recovery from day's low. Volvo offloaded stake in the company through block deals. About 12.8 lakh shares (or 4.7 percent equity) changed hands in three large block deals on the NSE and BSE in the price range of Rs 15,111-15,300/share.
NBCC gained 7.6 percent as the state-owned construction company says it will build India's first sub smart city on 30 hactare in East Delhi and will build India's tallest sky scraper of 100 storeys in 3 years.
03:30 pm Market ending: Late sell-off drags the market sharply, in one of the biggest fall after Budget proposals were presented in the Parliament. The Sensex ended down 213.00 points or 0.7 percent at 29380.73 and the Nifty slipped 73.60 points or 0.8 percent at 8922.65. About 1015 shares advanced, 1891 shares declined and 186 shares were unchanged.
Sun Pharma, Bajaj Auto, ITC, Bharti Airtel and HDFC are top gainers in the Sensex. Among the losers were Sesa Sterlite, Axis Bank, SBI, Tata Power and Hindalco.
02:58pm Market extends losses: The Sensex fell more than 650 points from day's high, down 224.50 points to 29369.23. The Nifty declined 80.15 points to 8916.10. The BSE Midcap and Smallcap indices shed more than 1 percent.
About 986 shares have advanced, 1843 shares declined, and 192 shares are unchanged on the BSE.
02:49pm Stocks in Action: Axis Bank, Sesa Sterlite, Hindalco and Tata Power lost more than 3 percent. Infosys, TCS, Reliance Industries, SBI, Wipro, HUL, M&M, Coal India, Tata Steel and BHEL shed 1-2 percent.
However, Sun Pharma bucked the trend and maintained its strong uptrend, up 7 percent. HDFC, ITC, Tata Motors, ICICI Bank and Bharti Airtel continued to support the market with marginal gains.
02:35pm Market under pressure: The marked washed out all its gains in afternoon trade with the Sensex falling 8.51 points to 29585.22 and the Nifty losing 12.65 points to 8983.60. Banks, technology and metals stocks see profit booking. However, pharma maintained its strong uptrend.
About 1190 shares have advanced, 1606 shares declined, and 197 shares are unchanged on the BSE.
02:20pm Usha Martin up 7%: In an ongoing coal block e-auctions: Usha Martin won bids for Brinda and Sasai block at Rs 1,804 per tonne.
Usha Martin says it will take minimum 1.5 years to make block operational. Total distance from Brinda and Sasai block to plant is 170 km; hence the landed cost for railways will be Rs 700 per tonne, it adds.
02:00pm Market Check
The market remained in a positive terrain led by healthcare, auto, telecom and select banking & financial stocks. The Sensex advanced 229.32 points to 29823.05 and the Nifty climbed 57.65 points to 9053.90.
The broader markets underperformed benchmarks with the BSE Midcap and Smallcap indices rising 0.3 percent each. About 1310 shares have advanced, 1441 shares declined, and 192 shares are unchanged on the BSE.
In a surprise move, the Reserve Bank of India slashed repo rate today by 25 basis points to 7.5 percent.
Sandeep S Shenoy of Pioneer Investcorp believes the market will take the rate cut very positively since it has exhausted all other triggers with the results season and Budget out of its way.
He believes this rate cut will ensure that flows into equity market will continue for the next couple of weeks.
Sun Pharma extended gains in afternoon trade, up 8 percent after its subsidiary Sun Pharma Advanced Research Company received USFDA nod for Elepsia XR extended release tablets, an anti-epileptic drug. It says product will be manufactured by Sun Pharma at Halol unit.
Shares of ICICI Bank, ITC, HDFC, Tata Motors, Bharti Airtel, Dr Reddy's Labs and Cipla rally 1-3 percent whereas Infosys, TCS, Wipro, Hindalco, Sesa Sterlite, HUL, Coal India and Tata Power declined 1-3 percent.
1:30 pm Macro-economy: Services sector expanded rapidly in February at the fastest growth rate in eight months, driven by significant rise in new business orders even as jobs fell marginally in the sector, an HSBC survey said on Wednesday. The HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a monthly basis, rose to an eight-month high of 53.9 in February, as against 52.4 in the previous month, indicating a robust expansion across the sector. A score above 50 indicates that the sector is expanding, while a figure below that level means contraction.
The market is holding up its gains as the Sensex is up 248.52 points at 29842.25. The Nifty up 63.40 points at 9059.65. About 1323 shares have advanced, 1338 shares declined, and 192 shares are unchanged.
Sun Pharma, ITC, HDFC, Bharti Airtel and ICICI Bank are top gainers in the Sensex. Among the losers are Hindalco, Tata Power, Coal India, Wipro and Sesa Sterlite.
Soon after RBI announcing a surprise rate cut, Chief Economic Advisor Arvind Subramanian today said that the global rating agencies should look at upgrading their stance on India's credit outlook. "Now we have a 50 basis points rate cut (in two tranches within two months) and I think that is good for the economy and all rate cuts benefits... If the outlook is looking good, the rating agencies should draw their lessons from that om improving the outlook," Subramanian told.
12:20pm Coal Auction: The government is ready to get round-two of the coal block auction process underway. Auction for 14 coal blocks in the schedule 3 began today. Blocks which are about to come into production are part of second phase of coal auction. Today, 3 coal blocks are up for auction.
Bids are open for Moitra block at Rs 1,004 per tonne and for Brinda & Sasai at Rs 1,802 per tonne in forward bidding. Opening bids price for Jitpur coal block (reserved for power sector) is at Rs 120 per tonne.
12:00pm Market Check
The market erased more than half of its early gains on the back of profit booking in technology, capital goods and select banks stocks. The Sensex climbed 174.06 points to 29767.79, which had rallied 400 points in early part of the session to hit 30000-mark. The Nifty rose 40.95 points to 9037.20.
The broader markets too came off day's low with the advance:decline ratio of 1:1.
Sun Pharma topped the buying list on Sensex, up 6 percent. Even its subsidiary Sun Pharma Advanced Research Company gained 6 percent on getting US FDA nod for Elepsia XR extended release tablets, an anti-epileptic drug. SPARC says product will be manufactured by Sun Pharma at Halol unit.
Private sector lender ICICI Bank and housing finance company HDFC gained 2 percent. HDFC Bank rose 0.7 percent whereas SBI and Axis Bank lost ground despite RBI surprised the street with a second out-of-the policy rate cut, cutting repo rate cut by 25 basis points to 7.5 percent. The RBI kept cash reserve ratio unchanged at 4 percent.
The RBI Governor Raghuram Rajan says disinflation is evolving at a faster pace than envisaged and further monetary action will be conditioned by incoming data.
Industry and experts welcomed the rate cut. Chief Economic Advisor, Arvind Subramanian believes today's rate cut is what the economy needs, saying the Budget is conducive to non-inflationary growth. MoS Finance, Jayant Sinha says the rate cut will provide a near-term boost to economy.
Tata Motors climbed 1.5 percent as apart from the RBI rate cut, strong JLR sales in the US boosted the stock. Jaguar Land Rover sales surged 14 percent in February bringing the total sales to rise by 11 percent this year so far.
Meanwhile, the bidding for spectrum airways began today and eight telecom companies including Bharti Airtel, Vodafone, Idea Cellular, Reliance Communications and Reliance Jio are expected to bid aggressively. The government is targeting a revenue of Rs 80,000 crore from the auction. Bharti Airtel and Reliance Communications surged 2 percent each while rival Idea Cellular gained 4 percent.
However, Reliance Industries, TCS, Infosys, Larsen & Toubro, Wipro and M&M fell 0.2-0.8 percent.
11:55 am Fiscal consolidatiion: Minister of state for finance Jayant Sinha said the government is pursuing a prudent fiscal consolidation roadmap and the rate cut will provide near-term boost to the economy. Echoing the words and sentiment of RBI governor Raghuram Rajan, Sinha too said further rate cut will depend on future data. The goal of the Budget, according to him, is to get the economy to non-inflationary growth. He said the market has moved from a hope rally to a conviction rally. He further stated, this move will come as a huge relief to most as it should bring down loan EMIs significantly and there is room for further easing of rates.
11:30 am Houseview: Telecom stocks are in focus as spectrum auction of 2G and 3G, which may see some aggressive bidding, begins today. One of the biggest aution 2G and 3G airwaves is touted to fetch over Rs 82,000 crore to the government's coffer.
A total of 380.75 MHz of spectrum in three bands - the premium 900 MHz band, 1,800 MHz and 800 MHz -- is put on sale besides 5 MHz in the 2,100 MHz band across 17 out of 22 telecom areas in the country. Licences for Idea Cellular's 9 circles, 6 circles of Airtel and 7 circles each of Vodafone and Reliance Telecom are coming up for renewal.
IIFL has a buy rating on both Bharti Airtel and Idea Cellular. The brokerage has set a target price of Rs 450 per share, indicating an upside of 26 percent while it thinks Idea may jump 28 percent. IIFL has a target of Rs 195 on Idea.
The RBI's surprise rate cut of 25 basis points (bps) powers the Bulls with the Sensex scaling 30000. The Sensex is up 264.44 points or 0.9 percent at 29858.17 and the Nifty gains 62.55 points or 0.7 percent at 9058.80. About 1398 shares have advanced, 906 shares declined, and 165 shares are unchanged.
Rate sensitive banks, auto and real estate stocks lead the way. Sun Pharma, ICICI Bank, Bharti Airtel, HDFC and Tata Motors are top gainers in the Sensex. Among the losers are Coal India, Hindalco, GAIL, Tata Power and Wipro.
Meanwhile, activity in India's services industry expanded at its fastest pace in eight months in February as improving domestic demand drove a surge in new orders. Increased activity at service firms, which make up over half the economy, is good news for policymakers - especially after last week's first annual budget from Prime Minister Narendra Modi's government failed to deliver big-bang reforms.
The HSBC Services Purchasing Managers' Index, which surveys around 350 private companies and is compiled by Markit, rose to 53.9 in February from 52.4, its highest since June 2014. A reading above 50 indicates growth.
10:50am Spectrum Auction: The much awaited spectrum auction, wherein 8 companies are bidding to acquire airwaves in four bands, started today.
The auction is the biggest ever sale of 2G and 3G airwaves which may fetch the government over Rs 82,000 crore.
A total of 380.75 MHz of spectrum in three bands - the premium 900 MHz band, 1,800 MHz and 800 MHz -- is put on sale besides 5 MHz in the 2,100 MHz band across 17 out of 22 telecom areas in the country.
Based on the reserve price, the government is estimated to garner over Rs 82,000 crore. Most of the spectrum put up for auction is presently held by Airtel, Vodafone, Idea Cellular and Reliance Telecom. Their licences are expiring in 2015-16.
10:35am Buzzing stocks: Cairn India is in focus today as media reports suggested that the ministry of petroleum and natural gas is set to extend the production-sharing contract onshore block at Barmer in Rajasthan by 10 years. The stock gained 0.9 percent.
Eicher Motors recovered 5 percent from day's low to trade flat amid huge volumes after 12.8 lakh shares or 4.7 percent equity shares changed hands in 3 large block deals seen on the NSE and BSE in the price range of Rs 15,111-15,300/share. Volvo sold more than half its stake.
Nitesh Estates gained 20 percent on reports that Goldman Sachs will invest Rs 1,850 crore in JV. This JV is planning to acquire rent yielding office parks, shopping malls and luxury hotels.
Mcnally Bharat climbed 8 percent as it allotted 25 lakh shares to Rekha Jhunjhunwala at Rs 100/share on a preferential basis. Allotment price was at a 10 percent premium to yesterday's closing price.
10:20am Reaction on rate cut: With the Government embarking on a path of qualitative fiscal consolidation and the formal adoption of inflation targeting, inflation trajectory is expected to stay benign and will aid banks in their decision making," says Arundhati Bhattacharya, chairman, SBI.
India's largest lender will take an appropriate call of a cut in base rate by looking at all evolving circumstances, she adds.
10:00am Market Check
The market continued to see buying interest, rising 1 percent following a surprise repo rate cut. Banking & financials, auto, realty and capital goods supported the market.
The Sensex rose 308.80 points to 29902.53 and the Nifty climbed 83.25 points to 9079.50. Two shares advanced for every share declining on the Bombay Stock Exchange.
The Reserve Bank of India slashed repo rate by 25 basis points to 7.5 percent but kept cash reserve ratio unchanged at 4 percent. Bank Nifty jumped 2 percent. ICICI Bank, HDFC, HDFC Bank, State Bank of India and Axis Bank gained 1-2 percent.
Tata Motors topped the buying list on Sensex, up 2.4 percent as US sales of Jaguar Land Rover increased 14 percent year-on-year to 6,327 units in February. FMCG major ITC also led support to the market, up 2 percent.
9:50 am RBI opinion: Commending the RBI on its move to cut interest rate, Chief Economic Adviser Arvind Subramanian said it also showed that the central bank and the government were on the same page, with regard to their economic outlook. In an interview to CNBC-TV18, Subramanian said the rate cut also showed that the Union Budget was conducive to non-inflationary growth. He said the rate cut was what the economy needed at this stage, and that it was consistent with the data in the Economic Survey as well as the Budget.
Commending the RBI on its move to cut interest rate, Chief Economic Adviser Arvind Subramanian said it also showed that the central bank and the government were on the same page, with regard to their economic outlook. In an interview to CNBC-TV18, Subramanian said the rate cut also showed that the Union Budget was conducive to non-inflationary growth. He said the rate cut was what the economy needed at this stage, and that it was consistent with the data in the Economic Survey as well as the Budget.
Adrian Mowat, managing director, chief Asian and emerging market equity strategist, JPMorgan said this is a positive surprise and will make people buy the market. ''We can see the market tracking higher quite easily on the back of what has happened here,'' he told CNBC-TV18.
Gautam Chhaochharia, head of India research, UBS Securities on the other is not ready to change sector mix. He believes growth will surprise negatively going ahead, while interest rates will surprise positive. This rate cut, according to him proves that the RBI too is of the same view. However, he says it will be positive for financials. Chhaochharia adds a part of the market was worried that RBI may not be as much on rate cycle in terms of cutting rate by100 bps through the year. This, he adds, will give them confidence that this is a secular track and not just a one off.
9:30 am Reaction to RBI move: Ananth Narayan, head, Financial Markets, Standard Chartered Bank said the move wasn't totally unexpected though it is a 'reluctant' rate cut. "It (rate cut) puts a lot of question marks about inflation; it puts question marks about the fisc. So, one doesn't know whether this is a pre-emptive cut for the April 7 policy or whether there is a follow up cut which will happen in April as well," he said in a discussion on CNBC-TV18. MS Raghvan of IDBI believes rate cut will be good both for the industry and the economy. According to him, the timing of the rate cut was surprising and he expects another 50 bps cut over the course of the year.
The market has opened at record high after Reserve Bank of India, in a surprise move, cut repo rate by 25 basis points to 7.5 percent. The Sensex is up 407.43 points or 1.4 percent at 30001.16, and the Nifty is up 112.90 points or 1 percent at 9109.15. About 533 shares have advanced, 94 shares declined, and 93 shares are unchanged.
The Reserve Bank of India signaled that it was convinced by the fiscal consolidation measures announced in the Budget. The RBI has kept the cash reserve ratio (CRR) unchanged at 4 percent.
"Disinflation is evolving along the path set out by the Reserve Bank in January 2014 and, in fact, at a faster pace than earlier envisaged," the RBI said in its statement for the reasons behind the rate cut. This is the second out of turn 25 basis point-cut after the one in January.
It is a celebration time for the bank stocks with major gainers like SBI, ICICI Bank, Axis Bank and HDFC. M&M is also up 2 percent. Among the losers are Dr Reddy's Labs, GAIL and Wipro.
The Indian rupee opened higher by 26 paise at 61.66 per dollar.
Himanshu Arora of Religare said, "The USD-INR pair is expected to strengthen today amid persistent upside in dollar against a basket of currencies and will continue to react to India's January fiscal deficit surpassing the full year target. However, upside to the dollar may remain capped as German Parliament approves Greek bailout extension. The USD-INR pair is expected to trade in the range of 61.76-62.18/dollar."
The dollar hovered below an 11-year high versus a basket of major currencies, as investors await US economic data and a European Central Bank meeting later this week for fresh direction clues.