Stock markets discount RBI rate cut, Sensex plunges 112 pts to end below 20K
After cheering RBI cutting lending rates initially, BSE benchmark Sensex today nosedived by 112 points to end below 20,000 level on profit selling at existing levels in rate-sensitive realty, auto and banking sectors.
Shortly after RBI announced a cut in short-term lending rate by 0.25 per cent and a surprise 0.25 per cent cut in cash reserve ratio, the 30-share Sensex gained over 100 points to touch day's high of 20,203.66.
Soon, a bout of profit-booking emerged in rate sensitive stocks that had logged gains recently on hopes of RBI delivering a rate cut after nine long months, dragging the index down to 19,990.90, a loss of 112.45 points or 0.56 percent, at close.
"Markets cheered the rate cut news by going above key levels. However, as the news was discounted in recent rally, it came down. There are different factors at play," said Anand Rathi, Founder & Chairman, Anand Rathi Financial Services.
The Sensex had gone up by 400 points in the past 14 trading sessions on hopes of rate cut.
In a "somewhat surprise move", cutting the CRR by a further 0.25 per cent to 4 per cent will add around Rs 18,000 crore of liquidity into the banking system, said Richard Iley, Chief Asia Economist, BNP Paribas.
Brokers also said sentiment was subdued after RBI projected a lower economic growth for current fiscal amid some investors trimming positions ahead of derivatives expiry.
The 50-share National Stock Exchange index Nifty closed 24.90 points, or 0.41 per cent, lower at 6,049.90, after touching the day's
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