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RBI status quo spooks Sensex, but hopes of more govt reforms limit fall

RBI kept interest rates unchanged at 5.15% and also maintained an accommodative stance.

ETMarkets.com|
Updated: Dec 05, 2019, 05.51 PM IST
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Some analysts were disappointed by the RBI decision and felt that it was negative for the markets as a rate cut was required to boost risk taking appetite in the economy.
NEW DELHI: Equity benchmarks Sensex and Nifty fluctuated between gains and losses to end lower in a volatile session on Thursday after RBI maintained status quo on policy rates in its bimonthly monetary policy review. Market participants were expecting a 25 basis point cut after GDP growth slowed down to six-year low in the September quarter.

However, hopes of more economic reforms by the government capped losses.

"A precautionary pause due to high food inflation and the tepid pace of transmission of previous rate cuts prompted RBI to turn more vigilant on the inflation trajectory. A steep cut in GDP growth forecast to 5 per cent for FY20 seems to be more realistic, and it raises prospects of more government intervention to revive consumption and investments activity,” said Vinod Nair, Head of Research at Geojit Financial Services.

The Reserve Bank of India kept interest rates unchanged at 5.15 per cent and also maintained an accommodative stance.

The market sentiment further took a hit with rate sensitive auto, realty and banking stocks leading the fall after the central bank cut the GDP growth forecast for the current financial year to 5 per cent from 6.1 per cent earlier.

Analysts were surprised by RBI decision and felt that it was negative for the market as a rate cut was required to boost risk taking appetite in the economy.

Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote said: "RBI has finally thrown the ball back in the government’s court to revive the economic engine which has further deteriorated since the last meet. Transmission of interest rates have not happened yet which could be one of the reasons RBI waited to cut rates and nudged the government and banks to take efforts from their end. Additionally, slightly higher inflationary tendencies might have also led to the pause in rate cut. But, this is a negative for the markets as a rate cut was required to boost risk taking appetite in the economy."

Market at a glance
BSE Sensex slipped 70.70 points, or 0.17 per cent, to 40,779.59, while NSE Nifty ended at 12,018.40, down 24.80 points or 0.21 per cent.

In the 30-pack Sensex, six stocks ended in the green and 24 in the red with TCS finishing as best performer and Bharti Airtel the worst. ITC, L&T, Infosys and Tech Mahindra joined TCS on the gainers’ list, gaining up to 2 per cent.

Tata Steel, IndusInd Bank, Tata Motors and Hero MotoCorp were among the Sensex stocks that declined.

The BSE Midcap index declined 0.32 per cent underperforming benchmark Sensex while the BSE Smallcap index outperformed the benchmark ending 0.02 per cent higher.

BSE Telecom index recorded 2.61 per cent loss on the sectoral return chart followed by Metal, Oil & Gas and Bankex indices. While BSE IT index was the best performer.

In terms of index contribution, TCS, ITC, Infosys and L&T were chart toppers while HDFC Bank, Bharti Airtel, Axis Bank and SBI were the top drags on Sensex.

Global markets
On the global front, Asian shares closed higher buoyed by hopes of a preliminary Sino-US trade deal before further tariffs kick in on Dec. 15. MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.5 per cent. Japan's Nikkei stock index rose 0.7 per cent. Also, European stocks opened higher in morning trade on trade deal optimism.
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