Indian benchmark indices lost 1 percent in the week ended December 6 after the market participants were left disappointed with the Reserve Bank of India’s (RBI) decision on December 5 to maintain repo rate, despite a majority hoping for a rate cut.
The market remained volatile during the week as it finished lower for four out of the five trading sessions amid domestic cues including RBI policy and hopes of a trade deal between the United States and China.
The RBI’s Monetary Policy Committee (MPC) surprisingly kept repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 percent against the market expectation of 0.25 bps cut, while maintaining the accommodative stance.
The RBI has cut its real gross domestic product (GDP) outlook for the current fiscal to 5 percent. The central bank had in October projected GDP growth for 2019-20 at 6.1 percent.
GDP growth in the second half of FY20 is forecast at 4.9-5.5 percent, and at 5.9-6.3 percent in the first half of FY21.
RBI revised CPI inflation projection upwards to 5.1-4.7 percent for H2 FY20 and 4.0-3.8 percent for H1 FY21.
In the past week, the Sensex fell 348.66 points (0.85 percent) to end at 40,445.15, while the Nifty shed 134.55 points (1.11 percent) to end at 11921.5.
On the global front, investors are waiting for concrete news on a hoped-for interim trade deal between the US and China before the new round of tariffs scheduled to kick in on December 15.
Foreign Institutional Investors (FIIs) remained net sellers the past week as they sold equities worth Rs 3,857.81 crore, while Domestic Institutional Investors (DIIs) bought equities worth of Rs 2,422.32 crore.
On a weekly basis, the rupee ended higher by 54 paise at 71.20 on December 6 versus the November 29 closing of 71.74.
“The recent decline shows disappointment among participants after the RBI policy outcome as the majority were hoping for a rate cut. And, since the Nifty has breached its immediate support at 11,900, we may see further profit-taking ahead, however, we feel it is a healthy correction and 11,700-11,800 zone would continue to act as a cushion,” Ajit Mishra, VP – Research, Religare Broking said.
The BSE mid-cap index shed 2.77 percent, while the small-cap index fell 1.63 percent and the BSE large-cap index was down 1.30 percent in the past week.
On the BSE, TCS added the most in terms of market value, followed by Kotak Mahindra Bank and ICICI Bank. On the other hand, SBI lost the most in terms of market value.
The Nifty PSU Bank index underperformed the sectoral indices with a loss of nearly 8 percent during the week.
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