Sensex dips 119 pts, Nifty fails to hold 9700 on caution ahead of RBI rate decision

Equity benchmarks failed to hold its record high levels on Tuesday as investors preferred to book profits ahead of the outcome of monetary policy committee meeting due Wednesday. The Nifty ended below 9,650 level after hitting psychological 9,700-mark for the first time in opening trade.

The 30-share BSE Sensex was down 118.93 points at 31,190.56 and the 50-share NSE Nifty dropped 37.95 points to 9,637.15 following weakness in global peers.

Experts expect some tactical correction in near term as the market surged 17 percent since the beginning of the year but they remain bullish on equities over the long term.

Sanjay Mookim, Director, India Equity Strategy at Bank of America Merrill Lynch signals caution on the market based on the twin impact of Goods and Services Tax rollout and higher valuations

He expects a fall on the Street going forward and advises investors to be ‘very careful; in this market.

Ridham Desai, MD, Morgan Stanley predicts the Nifty to triple in next 5 years while in the short term, it sees Sensex hitting 34,000 by June 2018 in bull case scenario.

With the indices trading near record highs, a hawkish commentary could result in some correction in the near term, Jayant Manglik, President, Retail Distribution, Religare Securities said. Traders and Investors should remain cautious and selective in stock picking, he advised.

The Reserve Bank of India will announce its bi-monthly monetary policy on Wednesday. Majority of economists expect the six-member monetary policy committee (MPC) to maintain status quo despite lower inflation, softer global commodity prices and fading El Nino risks.

Edelweiss feels the RBI could maintain status quo on policy rates even as the case for rate cut is strengthening.

The broader markets underperformed benchmarks as the BSE Midcap and Smallcap indices were down more than 0.6 percent each on weak breadth. About two shares declined for every share rising on the exchange.

Meanwhile, the Meteorological Department of India (MET) today has upgraded its monsoon forecast for June-September period to 98 percent of long-term period average against 96 percent earlier.

Rainfall for central India and south Peninsula is seen at 100 percent and 99 percent, respectively of long-average period for the June-December period, the Met said, adding monsoon may cover major parts of India by June-end.

Tata Motors was biggest losers among Sensex stocks, down 3.6 percent after subdued JLR’s UK sales growth in May.

Cement stocks like ACC, Ambuja Cements, UltraTech Cement and Shree Cement were down 1-2.5 percent after reports indicated some price cut in Delhi-NCR.

IT stocks saw sold gains amid weak trade. HCL Technologies and TCS rallied 3.6 percent each while Infosys gained 2 percent followed by Wipro (up 0.9 percent).

Adani Enterprises shares surged 8.6 percent after board gave final approval for Carmichael mine project in Australia.

Among others, ITC, Reliance Industries, L&T, ONGC, NTPC, Sun Pharma and Bharti Airtel slipped 1-3 percent.

European markets were lower amid a political rift between Qatar and several other Arab countries and as investors took a cautious approach ahead of a general election in the UK and a European Central Bank meeting. France’s CAC and Germany’s DAX were down 0.4-0.6 percent at the time of writing this article. Asia ended mixed.