India : Profit taking drags Sensex 97pts, Nifty below 8700 post RBI meet

MUMBAI : Profit booking, after two-day rally, drove the equity benchmarks lower on Tuesday as investors digested the RBI’s decision to keep rates unchanged but worried about inflation.Overall it was a consolidation day for the market. The 30-share BSE Sensex was down 97.41 points at 28,085.16 and the 50-share NSE Nifty fell 33.10 points to 8,678.25 while the broader markets also traded in line, falling 0.4 percent on weak breadth.

According to Nirmal Jain, the market had already run-up substantially and so is likely to consolidate, making investors selective. However, the underlying current still remains bullish and money will continue to flow in. The next big trigger could be the progress on Goods and Services Tax (GST).

The much-awaited monetary policy was a non-event today as the governor Raghuram Rajan left repo rate, at which banks borrow money from the Reserve Bank of India, unchanged at 6.5 percent and cash reserve ratio at 4 percent.

Rajan, who announced his last monetary policy today, sees upside risks to the inflation target of 5 percent for March 2017. “Much will depend on the benign effects of the monsoon on food prices,” he said, adding the stance of monetary policy remains accommodative and will continue to emphasise the adequate provision of liquidity.

Analysts say rising food prices and implementation of 7th Pay commission restricted further rate cut in near term.

“Going forward, the sharp surge in food prices, particularly pulses, is likely to be reversed to a certain extent due to the impact of a favourable monsoon and ensuing expected improvement in sowings patterns. This should take away some pressure off inflation. However, implementation of 7th Pay commission award might push inflationary pressure in the economy,” Arun Singh of Dun & Bradstreet India said.

He further said the path of policy rates would now be determined by the stance of Monetary Policy Committee, taking into account the new inflation target (of 4 percent) set by the Government.

The Nifty Bank index closed flat with a negative bias after volatility as Kotak Mahindra Bank and HDFC Bank fell 0.3-0.8 percent while SBI, PNB, Bank of Baroda and Axis Bank gained over half a percent. The Auto index ended half a percent lower.

Lupin was the biggest loser on Sensex, down 5 percent after its US business disappointed in Q1, falling 0.1 percent sequentially but grew 82 percent on yearly basis. Operational earnings also missed analysts’ estimates while profit surged 55 percent and revenue 40.7 percent YoY.

Idea Cellular topped the selling list on Nifty, down nearly 6 percent as June quarter profit fell 36 percent year-on-year.

HDFC and Max Financial Services were down over 1.5 percent. Boards of both companies on Monday approved the scheme of arrangement for merger of insurance business.

Mahindra and Mahindra declined over a percent ahead of Q1 earnings. A CNBC-TV18 poll expects consolidated profit to grow 5 percent and revenue 12.6 percent on yearly basis.

PSUs ONGC and Coal India bucked the trend, rising over a percent.

About 1573 shares declined against 1189 advancing shares on the Bombay Stock Exchange.