Analysts say that the focus now shifts to global events
Despite the cut in repo rate by the Reserve Bank of India (RBI) in its second bi-monthly Monetary Policy review on Tuesday, the S&P BSE Sensex lost 2.37 per cent, or 661 points at close. The CNX Nifty, too, lost 2.34 per cent, or 196 points to 8,236.
All sectoral indices ended in the red with rate sensitive sectors leading the decline. BSE Realty index was the top loser down 4 per cent while Bankex ended down 3.7 per cent and Auto index ended 2.3 per cent lower. Among others FMCG and metal indices ended down over 2 per cent each.
Rate sensitive sectors were among the top losers.
Here are three reasons why the Sensex slipped over 600 points on Tuesday:
RBI likely to be on prolonged pause: Markets seem to be taking a cue on future rate cuts from the tone of the policy, which suggests that the RBI will prefer to wait for data on monsoon forecast and keep a check inflation before cutting rates further.
Ajay Bodke, head of investment strategy and advisory, Prabhudas Lilladher, for instance, believes that though the rate cut is on expected lines, the commentary on inflation is a bit hawkish, which is giving an impression to investors that the RBI may remain on a prolonged pause as regards cutting rates further.
Concerns over monsoon: Analysts suggest that the road ahead for the markets will depend on the progress of monsoons, which according to latest estimates, has been trimmed to 88 per cent of the long-term average by the government on Tuesday.
According to Bodke, a lot will depend on monsoon and how it progresses over the next few months. A pick up in monsoon, which in turn could keep inflation under check, will help in perking up market sentiment. He sees the upside for the Nifty capped at 8,500 – 8,600 levels.
Lack of catalysts / positive triggers: With the RBI policy now over, analysts say that the focus now shifts to global events such as interest rate decision by the US Federal Reserve, developments across the Euro-zone, especially Greece and how the oil prices pan out going ahead. Analysts say that there are no catalysts / positive triggers right now that can take markets higher.
Explains Andrew Holland, CEO, Ambit Investment Advisors: “There is nothing much for the markets to be excited about going ahead and I expect the markets to go down from here on. The markets are in a bit of a twilight zone and there are no catalysts for any sector to move up. We’ll have to wait till the economy starts to recover. Global factors like Greece, interest rate decision by the US Federal Reserve (US Fed) could also weigh on the sentiment,” he adds.
