Sensex, Nifty off day's low on Raghuram Rajan's comments

Moneycontrol Bureau
Live Market Commentary

12:59pm Repo Rate hike possible? The Reserve Bank of India (RBI) in all probability will hike repo rates further, believes Samiran Chakrabarty of Standard Chartered. Speaking to CNBC-TV18 just a few minutes after the RBI hiked the repo rates by 25 basis points (bps), Chakrabarty says the central bank governor Raghuram Rajan has made inflation his top priority, and this focus would drive all the policy actions going ahead. “For the time being, I think withdrawal of the cumulative measures on liquidity would go to the backburner. Nobody is going to be too bothered by the pace at which they are getting withdrawn. The focus will come back completely on repo rate and more repo rates hikes are definitely possible,” adds Chakrabarty. Pratip Chaudhuri, chairman of State Bank of India expects bank rate and lending rates to go higher. Meanwhile, the Sensex is down 378.63 points or 1.83 percent at 20268.01, and the Nifty is down 112.70 points or 1.84 percent at 6002.85. Also Read - Pimco's El-Erian: 'Lots of opportunities' left 12:50pm Economist talks C Rangarajan, Chairman, Prime Minister's Economic Advisory Council, welcomes RBI governor Raghuram Rajan’s move to reduce marginal standing facility, or MSF, rate. However, he cautions, one cannot let the guard on the rupee slip and nor can the concerns on inflation be forgotten. He feels that is the reason why the repo rate was raised. He does not think growth will be impacted by the 25 basis points repo rate hike. He feels in the coming months, inflation is likely to come down on the back of the good monsoon across the country. But if it doesn't then there is a possibility that more measures will be introduced to tame inflation. According to him, PMEAC's estimate of 5.5 percent wholesale price index, or WPI, inflation by FY14-end looks valid. RBI had estimated FY14-end WPI inflation at 5 percent. 12:40pm Slight Recovery The market recovered from its day's low on Raghuram Rajan's comments post his first monetary policy review. He says that the central bank will ease liquidity measures as soon as market conditions allow. Open market operation (OMC) window will slowly be tapered once economy improves, he adds. The Sensex is down 376.93 points or 1.83 percent at 20269.71, which was down as much as 595 points to touch an intraday low of 20646.64 immediately after RBI policy. The Nifty is down 112 points or 1.83 percent at 6003.55. Also Read - Dena Bank & Vijaya Bank slid on exclusion from F&O segment 12:30pm Movers & Shakers India's largest lenders State Bank of India, ICICI Bank and HDFC Bank crashed 5 percent each. L&T and Maruti too are down 5 percent. However, only five stocks gained in the Sensex, which are Sun Pharma (up 2.4 percent), Wipro (up 1.57 percent), Dr Reddys Labs (1.02 percent), GAIL (up 1.2 percent)and BHEL (up 0.79 percent). Also Read - Buffett lauds Ben but laments lack of investment bargains 12:15pm Investors are selling in the market today with the both equity benchmarks falling over 2.5 percent after the RBI surprised investors with its monetary policy review. The Sensex is down 522.27 points or 2.53 percent at 20124.37, and the Nifty is down 161.05 points or 2.63 percent at 5954.50. Reserve Bank of India hiked repo rate -- the rate at which the RBI lends money to commercial banks -- by 25 bps to 7.5 percent, which was the surprising move for the street. The central bank cut marginal standing facility rate (MSF) by 75 bps to 9.5 percent. "RBI has reduced the MSF rate and hiked repo rate with the objective to normalize conduct and operations of monetary policy. RBI takes the note of slowdown in growth due to fall in investments and consumptions and hence widening the output gap which in turn can put downward pressure on inflation," says Kunal Shah, fund manager of debt at Kotak Mahindra Old Mutual Life Insurance. Rate sensitives got butchered quite badly with the Bankex and Realty falling 5.5 percent followed by Capital Goods with 3.5 percent loss.