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RBI policy meet, Japan downgrade, global growth worries hit markets; Sensex snaps 3-day rally

The S&P BSE Sensex snapped three-day rally and slipped as much as 155 points in trade, led by losses in power, oil & gas, metal and realty stocks.

ET Online|
Updated: Dec 01, 2014, 04.23 PM IST
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The S&P BSE Sensex snapped three-day rally and slipped as much as 155 points in trade, led by losses in power, oil & gas, metal and realty stocks. 
The S&P BSE Sensex snapped three-day rally and slipped as much as 155 points in trade, led by losses in power, oil & gas, metal and realty stocks. 
NEW DELHI: Indian markets cracked in second half of the trading session on Monday, as traders preferred to book profits ahead of Reserve Bank of India's policy meet on Tuesday and a downgrade by Moody's of Japan's sovereign debt rating and weak european PMI data also dented sentiment.

Most analysts expect the central bank to maintain status-quo on key policy rates on Tuesday. According to an ET Now poll, almost 80 per cent of respondents expect RBI to hold key policy rates on Tuesday, while only 20 per cent of bankers expect a repo rate cut of 25 bps.

The S&P BSE Sensex snapped three-day rally and slipped as much as 155 points in trade, led by losses in power, oil & gas, metal and realty stocks. Tracking the momentum, the 50-share Nifty index which hit a record high of 8623 earlier in the session also closed in negative.

The 50-share Nifty index ended at 8,555.90, down 32.35 points or 0.38 per cent. It hit all-time high of 8,623 and a low of 8,545.15 in trade today.

The S&P BSE Sensex closed at 28,559.62, down 134.37 points or 0.47 per cent. It touched a high of 28,809.64 and a low of 28,538.44 in trade today.

European markets too came under pressure after Markit's final November manufacturing Purchasing Managers' Index came at 50.1, its lowest reading since June 2013 and down from an earlier flash reading of 50.4 and from 50.6 in October.

"That is barely above the 50 mark that separates growth from contraction, and in a sign that there is little prospect of improvement in December," Reuters reported.

In an unexpected move, Moody's Investors Service downgraded Japan's sovereign debt rating by one notch to A1, citing rising uncertainty over the country's ability to hit its debt-reduction goal.

Strategy for RBI policy:

A majority of bankers expect the RBI to keep interest rates unchanged, says ET Now poll. Any dovish commentary would lead to further spike in the market.

"Most of the people are saying that there will be no rate cut - so if there is no cut, the market will take it on its stride and keep moving based on other triggers; but, if there is a cut for which I personally think there is a significant chance will auger well for markets," says Sudip Bandyopadhyay, President, Destimoney Securities Pvt Ltd.

"We believe the market will be positively surprised and that should lead to a major bull run for some time at least tomorrow or day after," he adds.

Sandeep Wagle, Founder & CEO, Power My Wealth is bullish on markets and he do not see a crackdown and investors should enter trade with a positive bias tomorrow.

"I would term Monday's movement as a correction, so in that sense if you do not want go long but you certainly cannot go short," he adds. Wagle is of the view that investors can play the market both sides, but if you ask me for my understanding of the trend, I would still be with the positive bias.

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