Sensex plummeted by 434 points on Friday due to heavy losses in banking and FMCG stocks despite a 25 basis point cut in the key policy rate by the RBI which also slashed the growth outlook for this fiscal.
After opening nearly 300 points higher, the 30-share index gave up all the gains to turn negative shortly after the policy announcement by the Reserve Bank of India (RBI).
After gyrating 770 points during the day, the 30-share Sensex ended 433.56 points or 1.14 percent lower at 37,673.31. It hit an intra-day low of 37,633.36 and a high of 38,403.54.
— CNBC-TV18 (@CNBCTV18Live) October 4, 2019
The broader NSE Nifty plunged 139.25 points or 1.23 percent to close at 11,174.75.
During the holiday-truncated week, Sensex plummeted 1,149.26 points or 2.96 percent, while Nifty declined 337.65 points or 2.93 percent.
The RBI cut repo rate by 25 basis points to 5.15 percent, bringing the cumulative reduction in the interest rate of 135 basis points for this calendar year. However, it also lowered the GDP growth forecast to 6.1 percent for FY20 from 6.9 percent earlier.
With the latest central bank move, investors appeared unsure if it is sufficient to support the flagging consumer demand amid slowing economic output, rising unemployment rate, and low business confidence.
Except for IT, all sectoral indices at the National Stock Exchange were in the red. The Nifty bank fell by 2.4 percent, financial service by 1.9 percent, FMCG by 1.5 percent and metal by 1.2 percent, ANI reported.
Among banks, Federal Bank fell 3.82 percent, Kotak Mahindra Bank 3.46 percent, ICICI Bank 3.17 percent, RBL Bank 2.82 percent, HDFC Bank 2.79 percent, SBI 2 percent, AXIS Bank 1.81 percent and Yes Bank 0.94 percent on the BSE. Led by losses in these scrips, the bank index dipped 2.45 percent to close at 31,303.39.
"Cut in GDP forecast by RBI coupled with selling in financials pulls indices down despite the rate cut," S Ranganathan, Head of Research, LKP Securities said.
The RBI also lowered its growth forecast for 2019-20 to 6.1 percent from 6.9 percent earlier and affirmed commitment to remain accommodative to address growth concerns 'as long as necessary'.
"Despite the rate cut and the dovish commentary, the equity market has reacted negatively, especially banks. That's because of the RBI's focus on the quick transmission of lower interest rates would put pressure on margins of banks," Gaurav Dua, Sr VP, Head - Capital Market Strategy & Investments, Sharekhan by BNP Paribas, said, to the PTI.
"Also, the economic growth outlook remains concerning despite the 135 bps policy rate cuts in 2019 and there is limited elbow room with RBI now to further take monetary actions to support the economy," he added.
Vinod Nair, Head Of Research at Geojit Financial Services, commented that despite the RBI's and the government's synchronised efforts to offset a slowdown in the economy, investors have taken a pessimistic view due to continued downward revision in GDP estimate and new stress in the banking system.
— CNBC-TV18 (@CNBCTV18Live) October 4, 2019
Among stocks, Grasim tumbled by 4.2 percent, UltraTech Cements by 4 percent, JSW Steel by 3.8 percent and Titan by 3.4 percent.
But IT majors like Wipro, Tata Consultancy Services, Infosys, Tech Mahindra and HCL Technologies showed marginal gains. The other gainers were ONGC, GAIL, NTPC, IndusInd Bank and Hero MotoCorp.
Rate-sensitive banking stocks faced the heat, with the BSE bankex, finance, auto and realty indices tanking up to 2.45 percent.
Broader BSE midcap and smallcap indices followed Sensex, shedding up to 0.94 percent.
Overall market breadth was negative with 1,636 scrips ending with losses and 976 posting gains on BSE. As many as 256 stocks hit their 52-week low levels while 346 scrips hit the lower circuits.
Meanwhile, were mixed before a key US job report. MSCI's broadest index of Asia Pacific shares outside Japan rose marginally while Japan's Nikkei stock index was up by 0.32 percent. Hong Kong shares were down by 1.11 percent with a fragile sentiment as the territory's government mulls emergency laws to contain months of often violent protest against China's rule of the former British colony. South Korean Kospi and Shanghai composite too were in the red.
Chinese markets are closed for a holiday.
Equities in Europe were trading lower in early sessions.
Meanwhile, the Indian rupee depreciated 9 paise to 70.97 against the US dollar intra-day.
Brent crude futures, the global oil benchmark, advanced 0.78 percent to $58.16 per barrel.
--With agency inputs
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Updated Date: Oct 04, 2019 17:27:48 IST