Markets Surrender Gains After RBI Cuts Repo Rate

The benchmark indices erased their morning gains after the Reserve Bank of India (RBI) Governor Shaktikanta Das slashed the key lending rate by 75 basis points in an emergency move on Friday, to counter the economic fallout of the coronavirus-induced 21-day lockout. The decision came after an unscheduled meeting of Mr Das-headed Monetary Policy Committee, which was originally scheduled to conduct a bi-monthly review early next month.

At 11:50 am, the Sensex had shed more than 1,200 points from day's highs and was at 29,585, weaker by 344 points or 1.1 per cent, and the Nifty was at 8,611, down 30 points or 0.3 per cent. The rate-sensitive stocks were trading mixed, with the Nifty banking index gaining nearly 2 per cent and the auto index losing by a similar margin.

The central bank cut the reverse repo rate by 90 basis points to 4 per cent and reduced the cash reserve ratio of all banks by 100 basis points, besides permitting all commercial banks and lending institutions to allow a three-month moratorium on all loans.

Meanwhile, Moody's Investors Service on Friday slashed its estimate of India's GDP growth for calendar year 2020 to 2.5 per cent from an earlier estimate of 5.3 per cent, citing rising economic cost of the coronavirus pandemic. That was sharply lower compared to the growth rate of 5 per cent in 2019.

The Nifty VIX, which is the guage of volatility and fear in the markets, has softened marginally by 1.1 per cent to 70.72 after hitting an intra-day high of 73.

On the stock-specific front, banking space witnessed buying post RBI announcements; Axis Bank soared 13 per cent to Rs 385, while other banking heavyweights such as SBI, ICICI Bank, Kotak Bank and HDFC Bank gained 2-3 per cent each. On the other hand, auto stocks saw selling pressure, with Hero Motorp, Maruti Suzuki and Bajaj Auto shedding 2-4 per cent each.

The NSE market breadth was positive; out of 2110 stocks traded on the NSE, there were 1076 advancing stocks as against 608 declines.