Sensex tumbles 792 points on Friday; RBI holds rates; rupee hits 74.22/$
Markets ended lower on Friday after the Reserve Bank of India (RBI) sprung a surprise and kept the repo rate unchanged at 6.50 per cent. Most experts had expected the central bank to hike rates by 25 bps.
The S&P BSE Sensex lost 792 points, or 2.25 per cent, to settle at 34,377 while the broader NSE’s Nifty50 index dropped 283 points, or 2.7 per cent, to close at 10,316. Among specific stocks, shares of oil marketing companies such as HPCL, BPCL and IOCL hit 52-week lows after the government announced that it will cut excise duties on petrol and diesel prices and OMCs will absorb Re 1 per litre.
Heavy losses were also visible in banking stocks with the Nifty Bank index slipping 1.5 per cent. YES Bank, State Bank of India (SBI), Bank of Baroda (BoB), IDFC Bank and ICICI Bank lost up to 5.1 per cent.
Earlier, the monetary policy committee (MPC) of the Reserve Bank on Friday kept the repo rate unchanged at 6.50 per cent in its fourth bi-monthly monetary policy review of 2018-19. The central bank changed the policy stance to ‘Calibrated tightening’ from ‘Neutral’. Calibrated tightening means rate will be maintained or hiked in this cycle.
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After a rally of more than 8 per cent in the first two months of 2017, voices have become louder on Dalal Street that the benchmark equity indices may touch fresh all-time highs in the coming weeks.
The 30-share BSE Sensex surged 2,186 points, or 8.21 per cent, to 28,812 on February 27 from 26,626 on December 30, 2016.
The momentum may remain positive in the long run, as India could see a rating upgrade in the coming months on account of a slew of reforms by the government, including an ambitious plan to introduce the Goods and Services Tax (GST).
GST is expected to improve tax compliance in the medium term besides removing barriers to investment, particularly for foreign direct investment. It will also improve the ease of doing business.