Post RBI announcement, equity markets run out of steam, end the day flat

Published: March 28, 2020 12:29:00 AM

The Indian rupee posted gains for the first time in the week ending the day at Rs 74.9 against the dollar, as opposed to Rs 75.19 on Thursday.

The benchmark Sensex, which had rallied by 1310 points earlier in the day, gave up most of its gains towards the end of the session.The benchmark Sensex, which had rallied by 1310 points earlier in the day, gave up most of its gains towards the end of the session.

By Urvashi Valecha

Equity markets could not hold their intra-day gains and ended the day flat on Friday after the Reserve Bank of India (RBI) announced a series of measures to ease the stress in the financial system as the country came under a lockdown since last week.

After trading in the green for three straight sessions, the benchmark Sensex ended its day down 0.44% or 131.18 points to close at 29,815.59. Broader Nifty50 ended the day up 18.8 points or 0.22% to close at 8660.25. The Indian rupee posted gains for the first time in the week ending the day at Rs 74.9 against the dollar, as opposed to Rs 75.19 on Thursday.

The benchmark Sensex, which had rallied by 1310 points earlier in the day, gave up most of its gains towards the end of the session.

According to Gopal Agrawal, head of macro strategy and senior fund manager, DSP Mutual Fund, the reduction in interest rates would help bring the cost of equities down. “The market was expecting more in terms of a financial package targeted to specific industries such as automobiles where an excise cut could have happened.

Cash for clunker and big infrastructure investment would have also helped,” he said, adding that the lowering of interest rates by 75 basis points (bps) and cash reserve ratio (CRR) by 100 bps was a good move to boost liquidity and cost of funds.

The RBI has cut CRR requirements for the first time since 2013. Foreign Portfolio Investors (FPIs) turned net buyers for the first time in the month. According to provisional data on the exchanges, they bought equities worth $47.5 million.

Shares of financials and banks, at which RBI’s measures were aimed, rallied during the Friday’s session with Nifty Bank ending the day 1.8% higher to close at 19,969.

Abhimanyu Sofat, head of research, IIFL Securities, said that additional measures for NBFCs and MFs was hoped for. “Providing liquidity in investment grade corporate bonds will help in improving the currently stalled credit markets. We had hoped for any additional liquidity window for NBFCs and MFs, which hopefully with the possible backstop from the government, RBI may be able to provide in the future,” he said.

On the other hand, Sanjeev Hota, head of research, Sharekhan by BNP Paribas, stated that the stimulus measures by RBI should be looked at from a different perspective. “The RBI looked at from the perspective of business continuity to keep the economy going. The market will react to positive indicators in the economy,” he said.

The biggest gainers on Nifty were Coal India which was up by 6.41%, followed by Axis Bank, Cipla, NTPC and ITC which were up 6.18%, 6%, 4.7% and 4.3% respectively. On the other hand, the biggest losers were Bajaj Finance, Hero Motocorp, IndusInd Bank, GAIL and Maruti Suzuki, which were down by 7.9%, 7.8% 5.6%, 4.58% and 4.57%.

NSE Midcap shed 0.6% however, NSE Smallcap ended its day 0.4% higher. Sectorally, the biggest gainers were Nifty Bank, Nifty Private Bank, Nifty Metal, Nifty Financial Services and Nifty Pharma.

Globally, bourses in China, South Korea and Taiwan traded in the red. European markets were also trading negative at the time of going to press.

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