Downward journey to continue; next support for Nifty lies at 5,350
While the market had factored the Reserve Bank of India's (RBI) 25 basis point hike in key rates, today's decline was largely on account of economic issues across the world, which will eventually impact growth in India.
The market opened lower on nervousness ahead of the RBI's monetary policy review and global worries arising from fears of the debt crisis in Greece spreading to other countries in the Eurozone. The Sensex opened 72 points lower at 18,060 and the Nifty resumed trade at 5,420, down 28 points from its previous close. Rate-sensitive sectors like banking, realty and auto saw selling pressure in early trade.
The market continued to trade sideways, till the announcement of a 25-basis-point increase in key rates by the RBI, which was in line with market expectations. Buying in select counters saw the market recover its losses and almost touching its previous closing level. At the day's high, the Sensex added 32 points to 18,155 and the Nifty was at 5,448, its closing figure on Wednesday.
However, the gains were short-lived as choppiness led the indices lower in subsequent trade, as key European markets were marred by the debt issue in Greece. US stock futures, which were in the red, also added to the woes. The market touched its intra-day lows in late trade, with the indices falling below their psychological levels. The Sensex tumbled 173 points to 17,959 and the Nifty was down 58 points to 5,390. Finally, the Sensex closed at 17,986, a decline of 146 points and the Nifty finished trade at 5,397, down 51 points.
The Nifty traded below the first support of 5,450 today and closed much below it. It is likely to go down to 5,350, subject to minor rallies.
The advance-decline ratio on the National Stock Exchange was 421:968.
The broader indices were also thrashed, with the BSE Mid-cap index declining 0.71% and the BSE Small-cap index closing 0.54% lower.
All sectoral gauges closed in the red. BSE IT (down 1.66%), BSE TECk (down 1.42%), BSE Capital Goods (down 1.35%), BSE Metal (down 1.17%) and BSE Consumer Durables (down 1.10%) were the top losers.
Reliance Infrastructure (up 2%), Hindustan Unilever (up 1.10%), State Bank of India (up 1.09%), BHEL (up 0.67%) and ONGC (up 0.35%) were the major gainers on the Sensex. TCS (down 2.40%), Sterlite Industries (down 2.33%), Larsen & Toubro (down 2%), Wipro (down 1.99%) and Maruti Suzuki (down 1.74%) were the laggards on the index.
The top gainers on the Nifty were Reliance Infra (up 1.93%), Bharat Petroleum Corporation (up 1.61%), Reliance Capital (up 1.55%), SBI (up 1.26%) and HUL (up 1.25%). The top losers on the benchmark were Ambuja Cement (down 5.42%), IDFC (down 4.12%), ACC (down 3.49%), TCS (down 2.89%) and SAIL (down 2.78%).
The RBI raised interest rates on Thursday for the 10th time in 15 months, underlining that it would continue to deal with high inflation, while balancing the adverse movements with global developments and their likely impact on domestic growth.
The RBI hiked the repo (short-term lending) and reverse repo (short-term borrowing) rates by 25 basis points each. The repo rate now stands at 7.5% and the reverse repo rate at 6.5%.
Markets in Asia settled with deep cuts on issues related to Greece's sovereign debt crisis. The European Central Bank opined that the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region's financial stability. The developments weighed on the outlook for exporters in the region.
The Shanghai Composite declined 1.52%, the Hang Seng tumbled 1.52%, the Jakarta Composite fell by 1.42%, the KLSE Composite shed 0.13%, the Nikkei 225 tanked 1.70%, the Straits Times settled 1.14% lower, the Seoul Composite shrank 1.91% and the Taiwan Weighted dived 2% in trade today.
Back home, foreign institutional investors were net sellers of stocks worth Rs170.56 crore, whereas domestic institutional investors were net buyers of equities worth Rs141.14 crore.
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