Sensex falls; RBI cuts MSF rate by 0.75%, ups repo by 0.25%

Moneycontrol Bureau
Live Market Commentary

12:00 pm Market check: The Sensex is down 508.54 points or 2.46 percent at 20138.10, and the Nifty down 159.90 points or 2.61 percent at 5955.65. About 587 shares have advanced, 1349 shares declined, and 92 shares are unchanged.

11:55 am Comments on RBI policy: HSBC says that the RBI policy has clearly surprised the market. Economic situation in India is not exciting and RBI policy is balanced and pragmatic.

Morgan Stanley agrees that the MSF rate reduction is a surprise and hike in repo rate is a good move. Repo move takes away market hope for rollback of tightening. Hike in repo and language on inflation focus is hawkish,” it said.

SIAM is concerned that the repo rate hike may dampen festive season auto sales. Ashok Leyland feels that appropriate measures have been taken by RBI.

11:45 am Market outlook: There is absolutely no fundamental reason for the market to see new highs, says Prabhat Awasthi of Nomura Financial Advisory & Securities.

On the contrary, taking a bearish view, Awasthi says that investors should use the current rally to pare down their equity positions by booking profits. Most analysts, however, were bullish on the fact that the market could rally anywhere between 3 to 5 percent.

Meanwhile, on specific stocks, Awasthi maintains caution on PSU banks and prefers private banks and has recently upgraded metal stocks.

11:30 am Opinion: Welcoming RBI's move on reducing MSF rate, C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council said that there is a possibility of further action if inflation doesn't ease. Speaking to CNBC-TV18, he said that growth will not be affected by 25 bps repo rate hike. 

"PMEAC's estimate of 5.5 percent WPI inflation by FY14-end looks valid. Impact of good monsoon may possibly be felt on food inflation," he added.

11.15 am Market check: The Sensex is down 502.56 points or 2.43 percent at 20144.08, and the Nifty down 152.00 points or 2.49 percent at 5963.55. About 579 shares have advanced, 1153 shares declined, and 102 shares are unchanged.

Banking stocks have not taken the monetary policy by new Governor chief Raghuram Rajan. Bank Nifty is down 6.6 percent HDFC twins, SBI, ICICI Bank and Kotak Mahindra losing around 5-6 percent each.

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The market has erased some of its yesterday's gains as the Sensex is down 239.17 points or 1.16 percent  at 20407.47, and the Nifty down 47.15 points or 0.77 percent at 6068.40. About 756 shares have advanced, 946 shares declined, and 111 shares are unchanged.

The Reserve Bank of India has cut marginal standing facility (MSF) by 75 basis points in its mid quarter monetary policy review. Reserve Bank Governor Raghuram Rajan also hiked repo rate by  25 basis points.

Majority of the bankers and economists that CNBC-TV18 spoke to expect Reserve Bank Governor Raghuram Rajan to partially roll back the measures taken in July to prop up the rupee. 

Wipro, TCS, Sun Pharma and GAIL are top gainers in the Sensex. while banking stocks take a knock on the credit policy.