RBI cuts repo rate by 40 bps; Sensex dips by 260 points

The Indian government is pulling up all its aces to create a cheer in the dull economic environment. In spite of that, the markets remained cautious even today, as Sensex fell by 260.31 points or 0.84 to settle at 30,672.59 levels while, Nifty declined by 67 points or 0.74 per cent to reach the level of 9,039.25.

RBI announced that the repo rate and reverse repo rate will be reduced by 40 bps, bringing the repo rate at four per cent and reverse repo rate at 3.35 per cent.

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A cautious language in the statement of RBI Governor has raised concerns about the state of the economy and its path going ahead. Since the markets were hopeful of some more relief, their initial reaction to RBI announcement had been negative. Nevertheless, the investors are likely to remain cautious with the increasing number of COVID-19 cases, uncertainty and lack of clarity about the vaccines and lockdown restrictions as well as due to the change in economic policies and crude oil price movements.

Other Asian markets also witnessed a sharp sell-off as Shanghai index fell by 1.42 per cent and Nikkei closed in red, down by 0.80 per cent. Hang Seng tanked by 5.56 per cent as a result of the tensions flaring up about the beginning of a new row of trade war between China and US and also due to the concerns that China may move to pass a hugely controversial national security law, bringing the biggest blow to Hong Kong's autonomy since its handover to China in 1997. Absorbing the fears, European indices such as FTSE 100, DAX and CAC 40 opened on a negative note as well, trading in red, down by 1.06 per cent, 0.41 per cent and 0.25 per cent, respectively.

In Sensex basket, 12 stocks advanced while, 18 declined out of the total 30 stocks. Despite the huge sell-off, recovery in buying auto, pharma and IT stocks took place in the latter part of the session as M&M gained by 4.46 per cent, Infosys went up by 3.01 per cent, Asian Paints gained by 2.72 per cent, Tech Mahindra gained by 1.88 per cent, Maruti increased by 1.64 per cent, Hero MotoCorp increased by 1.45 per cent, TCS gained by 1.38 per cent, Sun Pharmaceuticals gained by 0.63 per cent, etc.

Sensex draggers majorly consisted of banking and financial stock, as its shareholders are beginning to worry about the health of banks with the increasing burden. Stock of Axis Bank declined by 5.65 per cent, HDFC fell by 4.99 per cent, Bajaj Finance declined by 4.67 per cent, ICICI Bank fell by 4.32 per cent, etc.

Amongst the sectoral indices, BSE Finance and BSE Bankex were the biggest losers declining by three per cent and 2.44 per cent, respectively while, BSE IT index gained by 1.68 per cent and BSE Teck index gained by 1.44 per cent.