Sensex ends 243 pts down on RBI's dovish note; Budget eyed

The BSE Sensex snapped four-day winning streak on Thursday, losing as much as 297 points intraday after the RBI maintained a dovish tone in its monetary policy review today that left policy rates unchanged. Profit booking ahead of a big event like Union Budget 2012-13 (tomorrow) may be another reason for driving the Nifty below 5400 level.

A section of the market was expecting rate cut announcement and was visibly disappointed. The rest said the non-event was already factored in. The central bank said high inflation, high fiscal deficit, rupee depreciation and high oil prices globally forced it to refrain from cutting policy rates. Prime Minister's economic advisory panel chief maintained that close to 7% inflation was very discomforting. Economic Survey said the Indian rupee depreciated by 12.4% on monthly basis in FY12 (it fell by 40 paise to 50.31/USD today) and the Brent crude is trading around USD 125 a barrel.

Market experts remain sceptical about rate cut in next policy meet as well, which is scheduled to be announced on April 17. They believe rate cut will be possible only if oil prices start falling.

Morgan Stanley is of the opinion that equity market participants were disappointed with the decision and expects a rate cut to come in April, depending upon crude prices.

The 30-share BSE Sensex fell 243.45 points or 1.36%, to close at 17,675.85, weighed down by 22 components. Meanwhile, the 50-share NSE Nifty shed 83.40 points or 1.53% to 5,380.50 led by sell-off in banks & financials, oil & gas, capital goods, realty and telecom stocks.

Now the market is eyeing Union Budget with lot of expectations. Consensus estimates for fiscal deficit for FY12 stands at 5.1-5.4% and net borrowing in the range of Rs 4.2-4.5 lakh crore.

All sectoral indices ended in the red barring technology. The BSE Realty and Bankex tanked 2.6% each while Capital Goods and Oil & Gas indices lost 2%.

Country's largest lenders SBI and ICICI Bank slipped 2-2.5% while rival HDFC Bank was down 3%. Housing finance company HDFC declined 2%.

Oil & gas producers and index heavyweights Reliance Industries and ONGC were down 2-2.5%. Capital goods majors L&T and BHEL dropped 2-3%.

Realty firm DLF tumbled nearly 5%. Anil Dhirubhai Ambani Group's stocks Reliance Communications and Reliance Power were down 5% & 2.5%, respectively after the NSE said it would remove both stocks from Nifty 50 w.e.f. April 27.

In the second line shares, infrastructure, banks and shipping stocks were down while aviation stocks outperformed the market.

Titan Industries, Sintex, Syndicate Bank, Andhra Bank, GE Shipping, Punj Lloyd, IVRCL, Allahabad Bank and HCC were down 4-6%.

However, Educomp Solutions shot up 4.5% ahead of Union Budget.

Aviation stocks witnessed huge buying interest today - Jet Airways was up 1.8%, SpiceJet jumped 6% and Kingfisher Airlines gained 4.8%.

The broader markets fell 1-1.4% and declining shares outnumbered advancing in the ratio of 3:1.