Sensex tanks 244 points as RBI keeps rates unchanged (Roundup)
Mumbai, June 18 (IANS) A benchmark index of Indian equities markets fell 244 points after the Reserve Bank of India (RBI) left benchmark rates unchanged in its mid-quarter monetary policy review Monday. Rate-sensitive banking, auto and realty stocks were the worst hit.
The RBI cited two reasons for not cutting interest rates. The central bank said high interest rate was not the only factor choking growth and rate cuts at this stage would increase liquidity in the system and cause inflation to spiral out of control.
Moreover, the RBI made it clear that further rate cuts were unlikely until the government did its bit to contain inflation by curbing wasteful expenditure.
It was widely believed that the RBI would cut key rates that would have translated in lowering of interest being paid by consumers on their loans for consumer durables, homes or automobiles.
The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 17,039.54 points, closed 244 points or 1.44 percent down, and stood at 16,705.83 points from its previous close of 16,949.83 points.
The Sensex had touched a high of 17,109.95 and a low of 16,636.09 points in intra-day trade.
The BSE midcap index was down 63.14 points while the smallcap index fell 44.35 points.
The wider 50-scrip S&P CNX Nifty of the National Stock Exchange was 1.46 percent or 74.80 lower at 5,064.25 points.
The RBI's decision dragged the banking stocks down with the bank index at the BSE fell 365.78 points in the intra-day trade and stood at 11,220.87 points.
The SBI scrip was down 4.36 percent at Rs.2087.65, followed by ICICI Bank which fell by 3.34 percent at Rs.816.70. HDFC Bank was down 2.71 percent at Rs.533.00.
The realty index at BSE was down 45.08 points at 1,577.78 points.
The automobile index too fell by 58.75 points and stood at 9,155.05 points. Maruti Suzuki fell 16.50 points or 1.49 percent at Rs.1,091.50, followed by Tata Motors, down 2.05 points or 0.85 percent at Rs.238.
Hero MotoCorp was down 8.15 points or 0.41 percent at Rs.1,991.90 and so was Mahindra and Mahindra which fell 6.35 points or 0.91 percent at Rs.691.05
Only two of the 30-scrip Sensex gained in the day's trade -- these were Tata steel, up 5.35 points at Rs.418.75 and Bajaj Auto, up 14.40 points at Rs.1,541.95.
Major Sensex losers included Sterlite Inds, down 4.35 points at Rs.95.90; ONGC, down 2.25 points at Rs.263.20; Dr Reddy's Lab down 37.55 points at Rs.1,542.90; Gail India down 6.70 points at Rs.327.45; and BHEL, down 4.20 points at Rs.214.40
The stock markets will now hope for policy reforms by the government and a good monsoon for an upward trend, according to Dipen Shah, head of fundamental research at Kotak Securities.
"From the market's perspective, this is disappointing, and it will now have to wait for government action and the monsoon's progress to see any sustained uptrend," Shah said.
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