Posting their biggest fall in three weeks, the BSE Sensex nosedived 660 points on IMD’s lowering monsoon forecast for this year and RBI taking a cautious stance on the economic recovery even as it cut policy rates by 25 basis points.
BSE Sensex was down 660.61 points to settle at 27,188.38. Similarly, NSE Nifty fell 196.95 points to close at 8236.45.
In its second bi-monthly policy review, the Reserve Bank of India cut interest rate by 0.25 per cent for the third time this year.
Market Outlook by Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services
As expected anything less than 50bps is not being welcomed by the market. The RBIs action is as per expectation but with caveats which is negatively impacting the market. RBI has highlighted risk from below-normal-monsoon, food inflation, increase in crude prices and external environment. In spite of the conservative policy of RBI, it has decided to front-load with a 25bps rate cut and then wait for further clarity. This diminishes the scope for further cut in the medium-term. Hence RBIs rate cut is only a indicator while kick-start of Government spending remains the key.
Meanwhile, monsoon is expected to be “deficient” as the Met department today gave “below normal” forecast for rains in the country which is likely to trigger fears of a drought.
Rate sensitive — realty, banking and auto — suffered the most as selling remained unabated throughout the day.
“RBI expects the inflation to tick higher from here owing to higher oil prices, below normal monsoon, and fall in crop output. The rise in input costs may further impact the profitability of the already ailing India Inc,” said Hiren Dhakan, Associate Fund manager at Bonanza Portfolio.
Market Wrap Up by Alex Mathews, Head Research, Geojit BNP Paribas Financial Services
Today Nifty opened with a downside gap due to weak global cues and later moved down below its crucial moving average support levels at 8333 due to various domestic and international cues.
Today the central bank in its policy meet, announced a repo rate cut of 25 basis; from 7.5% to 7.25%. The central maintained all other policy tools like SLR, CRR unchanged. The central bank also lowered the projections of the economic growth as measured by GVA (gross value added) to 7.6% from 7.8% as estimated in April. The news of the downgrade in the current year’s monsoon rains forecast by the government agencies added pressure to the downfall.
Nifty closed 8236 down around 196 points. But the market breadth stood negative as there were seen 823 stocks advancing against 1858 stocks declining. The Nifty volatility index, India VIX stood at 16.8200 down around 0.54%. All the sectors ended in red and the major losers were the Realty and Banking sector which ended down around 4.01% and 3.70% respectively.
In the stocks’ front, the major gainers were Zeel and Lupin which closed up around 2.58% and 0.69% respectively whereas the selling was seen in Axis Bank and IndusInd bank closed down around 4.44% and 4.32% respectively.
The FIIs were buyers in the cash market segment on 01 June 2015, Monday, bought shares worth Rs 113.47 crore. The DIIs on the other hand were also buyers on 01 June, bought shares worth Rs 49.34 crore in the capital markets segment.
The European markets were trading lower on the concerns that the Greece and its creditors didn’t yet reached a deal to its payment to IMF. The US index futures were also trading lower.
Tomorrow for Indian markets the major trigger will be the HSBC India Services PMI data.
Market View by Mr. Anand James, Co Head Technical Research Desk, Geojit BNP Paribas – June 2, 2105
RBI’s upward revision of inflation expectation and the prospects of below normal monsoon have clearly put brakes on the rate cut fuelled market rally. With this, the window for an August cut is close to nil, but at the same time, has elevated the potential for bigger swings ahead of Greece debt payment deadlines and FOMC meeting.
After opening in positive terrain, the 30-share index touched day’s high of 27,902.53.
It gave up initial gains and slipped into negative zone just after RBI monetary policy and nosedived to hit day’s low of 27,146.68 before settling at 27,188.38 points, down 660.61 points or 2.37 per cent
This is index’s biggest single day fall since May 6.
Market View by Gaurav Jain, Director, Hem Securities
Long-awaited RBI policy which met with the street expectation of 25 bps cut in Repo rate failed to push indices higher. Higher inflation worries along with weaker monsoon rains forecast weighed on the RBI’s move. Banks were the biggest hit in today’s trade.
The wide-based NSE Nifty slipped below the crucial 8,300-level by plunging 196.95 points or 2.34 per cent to settle at 8,236.45. Intra-day, it shuttled between 8,445.35 and 8,226.05
“Adding to pessimism, Indian Meteorological Dept (IMD) latest report on monsoon indicates delay and downgrade in monsoon forecast, further dampened the sentiments,” said Jayant Manglik, President-retail distribution of Religare Securities.
Furthermore, weakness in the rupee which fell by 26 paise to Rs 63.96 (intra-day) against the dollar also weighed on the sentiments.
Barring Airtel, all Sensex stocks ended in red.
Among rate Rate sensitive scrips, SBI topped the list by falling 4.28 per cent, followed by Axis Bank by 4.20 per cent, ICICI Bank lost 3.70 per cent, HDFC 3.55 per cent and HDFC Bank 2.65 per cent. “As expected anything less than 50 bps is not being welcomed by the market. RBI has highlighted risk from below normal monsoon, food inflation, increase in crude prices and external environment,” said Vinod Nair, Head-Fundamental Research at Geojit BNP Paribas Financial Services.
Other prominent losers on the Sensex were Hindalco, ITC, Hero MotoCorp, Cipla, HUL, Bajaj Auto, M&M, Wipro, Tata Steel, Sun Pharma, L&T and Coal India.
Selling was also witnessed in broader markets with mid-cap index falling 2.22 per cent and small-cap down 2.06 per cent.
Among the BSE sectoral indices, realty slumped by 3.83 per cent, followed by banking 3.46 per cent, FMCG 2.83 per cent, metal 2.11 per cent, auto 2.08 per cent, capital goods 1.74 per cent, consumer durable 1.61 per cent, healthcare 1.58 per cent, IT 1.42 per cent, power 1.29 per cent and teck 1.23 per cent.
Total market breadth continued to be negative as 1,875 stocks declined and 804 advanced, while 104 ruled steady.
The total turnover jumped to Rs 3,086.68 crore from Rs 2,699.25 crore yesterday.
Dollar stands tall, Asian shares slip
Reuters – The dollar ascended to a new 12-1/2-year peak against the yen on Tuesday, while Asian shares fell for a second day as the stronger greenback pressured commodity prices.
But financial spreadbetters predicted a brighter day in Europe, with Britain’s FTSE 100 and Germany’s DAX both seen opening up as much as 0.2 percent, and France’s CAC 40 as much as 0.3 percent.
“Ahead of European trade we are calling the major bourses firmer, with Greece headlines likely to remain the dominant theme,” IG market strategist Stan Shamu wrote in a note.
The dollar rose as high as 125.07 yen, its loftiest since late 2002, before retracing to stand at 124.66 yen, down about 0.1 percent on the day, after a spate of mostly upbeat U.S. data reinforced expectations that the Federal Reserve would raise interest rates this year.
“The rise in the dollar against the yen has been steep but sentiment favours testing new highs rather than consolidating,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down about 0.8 percent, falling for the second day and touching its lowest intraday level since April 3, while Japan’s Nikkei stock index erased earlier gains and slipped 0.1 percent, snapping its 12-day winning streak that was the longest since February 1988.
Australian shares skidded about 1.7 percent, pressured by weaker commodities.
The Reserve Bank of Australia kept rates on hold at a record low of 2.0 percent at its latest policy meeting on Tuesday as expected, but the Australian dollar surged more than 1 percent on the day after the RBA did not include an explicit bias to ease again.
On Wall Street on Monday, U.S. stocks began the month with modest gains after the data. Consumer spending remained flat in April, but construction spending and manufacturing gained momentum, backing the view that the U.S. central bank is on track to begin to hike rates later this year.
The economic reports helped U.S. Treasury yields rise to one-week highs, giving the greenback a lift.
In Asian trading on Tuesday, the yield on benchmark 10-year notes stood at 2.186 percent, not far from the U.S. close of 2.192 percent on Monday.
Boston Fed President Eric Rosengren, who is not a voting member of the Federal Open Market Committee, said on Monday he would like to begin raising rates as soon as possible, but also noted risks from the slowdown in China and Europe and the fact that U.S. growth is still not strong enough.
Market participants awaited Friday’s U.S. nonfarm payrolls report for a further gauge of the strength of employment conditions. The report is expected to show 225,000 jobs created in May, according to a Reuters poll of economists.
Uncertainty about the outcome of Greece’s financial negotiations continued to weigh on the euro, though hope for a resolution underpinned the common currency. It was last up about 0.2 percent at $1.0945.
The leaders of Germany, France, the International Monetary Fund, the European Central Bank and the European Commission agreed at a meeting late on Monday to stay in close contact in the coming days to work on Greek debt negotiations, as Athens and its lenders struggled to reach deal that would prevent the country from defaulting on its debt.
Greece is due to make a 300-million-euro ($327.93 million) repayment to the IMF on Friday.
The euro was also pressured by business surveys that showed European manufacturing activity remained even more sluggish than its plodding global counterparts.
An index tracking the dollar against a basket of six rival currencies edged down 0.1 percent on the day, to 97.271.
The bleak global factory outlook combined with the firmer dollar to hit prices of dollar-denominated commodities, though they steadied in late Asian trade.
Copper erased losses and added about 0.2 percent to $6,034 a tonne, moving away from a six-week low of $5,985 hit on Monday.
U.S. crude oil futures were last up about 0.2 percent in Asian trading at $60.33 a barrel, after plunging more than 1 percent at one point on Monday. Brent crude futures also added about 0.2 percent to $65.00.