Mid-day Mood | Sensex falls 700 pts after RBI policy, Nifty down nearly 1%; bank stocks drag

India VIX, the fear gauge, remained elevated at 15, suggesting that consolidation is likely to persist in the near future

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Benchmark indices erased early gains and slipped deep into the red after the Reserve Bank of India (RBI MPC held the repo rate steady on February 8. BSE Sensex tumbled 700 points while Nifty fell nearly 1 percent, dragged by banking stocks.

The street was disappointed as there was no clear indication of a rate cut happening anytime soon, analysts said.

At noon, the Sensex was down 459.80 points, or 0.64 percent, at 71,692.20, and the Nifty was down 128.70 points, or 0.59 percent, at 21,801.80.
About 1,417 shares advanced, 1,763 declined and 66 were unchanged.

“FY24 CPI inflation was maintained at 5.4 percent, while the Street was expecting some moderation. The governor did not give any clear indication on rate cuts which also disappointed investors,” said Ajit Kabi of LKP Securities.

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India VIX, the fear gauge, remained elevated at 15, suggesting that a period of consolidation is likely to persist in the near future.

Nifty Bank leads fall

Among sectors, Nifty Bank fell close to a percent on liquidity concerns. “Bankers were hoping that cash reserve ratio (CRR) will be brought down from 4.5 percent to provide liquidity in the system. Historically, CRR level has been at 4 percent,” Anand Dama of Emkay Financial Services told Moneycontrol.

Since no changes were announced on that front, private banking stocks like Axis Bank, ICICI Bank, Kotak Mahindra Bank and HDFC Bank all slipped over 2 percent.

PSU banks were trading higher, with SBI up 4 percent and Bank of Baroda up 3 percent. This is because PSU bank will see mark-to-market gains on government securities held by them as yields soften, said Dama.

“Apart from treasury gains, PSU banks rally will sustain as higher staffing costs are now behind. Their pre-provisioning operating profit will grow from here,” he added.

Liquidity in the banking system is estimated to be in deficit of around Rs 1.53 lakh crore as on February 7.

Also Read: RBI MPC impact on auto stocks: Maruti Suzuki, M&M, Tata Motors fall up to 2%

Fundamental and technical view

In light of the major political event, the Lok Sabha elections, the RBI is unlikely to consider a rate cut, said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS. “We could expect the rate cut cycle to start in early H2FY25,” he said.

Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities, said since India’s economic growth was stable and the US Fed, too, was in no mood to cut rates soon, the RBI would likely maintain its hawkish stance in H1CY2024.

Check our RBI MPC live blog

On back of this, markets may see some short-term correction but the larger trend on the upside is still intact.

“If the Nifty breaks 21,870 region, it will extend slippage to 21,800-720 could be seen. Alternatively, a test of the same or a direct rise above 22,000 could set the 22,200-240 /22,450-550 move in motion,”  Anand James, Chief Market Strategist, Geojit Financial Services, said.

Key Nifty gainers

Power Grid, SBI, BPCL, Hindalco and Coal India

Key Nifty losers

Britannia, Tata Consumer, Axis Bank and Nestle

Key Sensex gainers

Power Grid, SBI and TCS

Key Sensex losers

Axis Bank, ICICI Bank and Nestle

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.