Markets snap 4-day rally amid profit-taking; auto, bank stocks fall

Equity benchmarks Sensex and Nifty surrendered early gains to close with losses on Thursday, snapping their four-day winning streak as investors pared exposure to auto, bank and IT stocks after the RBI left its key interest rate unchanged.

After remaining in the positive territory for most of the session, the 30-share BSE Sensex fell 294.32 points or 0.47% to settle at 62,848.64. During the day, it tumbled 353.23 points or 0.55% to 62,789.73.

The NSE Nifty declined 91.85 points or 0.49% to end at 18,634.55.

“Investor sentiment took a downturn following the in-line monetary policy announcement by the RBI, as the market had higher expectations for a more optimistic revision in the inflation outlook, taking into account the recent easing of inflation data.”

“The RBI’s decision to lower the inflation rate by only 10 bps suggests a cautious stance due to geopolitical uncertainties, the potential impact of El Nino and the increase in Minimum Support Price,” Vinod Nair, Head of Research at Geojit Financial Services, said.

Kotak Mahindra Bank was the biggest loser in the Sensex pack, sliding 2.68%, followed by Tech Mahindra, Mahindra & Mahindra, Axis Bank, Hindustan Unilever, Tata Motors, Tata Consultancy Services, Bajaj Finserv, Bajaj Finance, Nestle and Titan.

In contrast, NTPC, Power Grid, Larsen & Toubro, HDFC, Reliance and HDFC Bank were the gainers.

In the broader market, the BSE midcap gauge fell by 0.87% and smallcap index declined by 0.47%.

“Indian equities witnessed profit booking on the day of the RBI policy meeting outcome, which was on expected lines…post the RBI policy outcome; markets saw some profit booking in the interest rate-sensitive sectors, which dragged the indices down…Except for Metals, all sectors ended in red,” Siddhartha Khemka, Head – of Retail Research, at Motilal Oswal Financial Services, said.

Among the indices, realty tumbled by 1.51%, telecommunication (1.06%), auto (0.97%), IT (0.88%), FMCG (0.81%), bankex (0.80%), consumer discretionary (0.76%) and commodities (0.66%).

Industrials, utilities, capital goods and power were the gainers.

“Global markets were mixed on Thursday as negative sentiments arising out of expectations of further interest rate hikes by major central banks and the fact that Eurozone has entered recession after its Janaury-Mar GDP fell 0.1% was offset by optimism over more Chinese stimulus measures,” Deepak Jasani, Head of Retail Research, HDFC Securities, said.

In Asian markets, Seoul and Tokyo ended lower, while Shanghai and Hong Kong settled in the green.

Equity markets in Europe were trading mostly in positive territory. The U.S. markets ended mostly lower on Wednesday.

The Reserve Bank of India on Thursday left its key interest rate unchanged for a second straight policy meeting but signalled that it wants to see inflation moderate more while preserving the growth momentum.

The monetary policy committee (MPC), which has three members from RBI and an equal number of external experts, voted unanimously to keep the benchmark repurchase, or repo rate unchanged at 6.50%.

While consumer price inflation eased during March-April 2023 and moved into the tolerance band, headline inflation is still above the target of 4% and is expected to remain so during the rest of the current fiscal, RBI Governor Shaktikanta Das said announcing the monetary policy decision.

The central bank lowered its inflation projection for the current financial year to 5.1%, as Governor Shaktikanta Das said the central bank’s monetary policy actions are yielding the desired results.

It also retained the GDP growth projection for the current fiscal at 6.5%, on the back of supportive domestic demand conditions.

Dhiraj Relli, MD and CEO, HDFC Securities, said, “The RBI MPC left the repo rates unchanged at its meeting on June 8 in line with street expectations. MPC members were in a sweet spot in the backdrop of higher than expected GDP numbers and moderating headline and core inflation print”.

Global oil benchmark Brent crude dipped 0.31% to $76.71 a barrel.

Foreign Institutional Investors (FIIs) bought equities worth ₹1,382.57 crore on Wednesday, according to exchange data.

“Sharp correction in the last hour trade pulled down the Sensex below the 63,000 mark, as realty shares faltered sharply after the recent upsurge. While the rate hike pause by the MPC was on expected lines, subdued commentary by the RBI on inflation for this fiscal year dampened the sentiment,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.