Nifty ends at 8102, Sensex falls, banks crack post RBI policy

Moneycontrol Bureau3:30 pm Market closing: After a tumultous ride, the market has ended in red. The Sensex was down 155.89 points or 0.6 percent at 26236.87, and the Nifty down 41.10 points or 0.5 percent at 8102.05. About 1106 shares advanced, 1501 shares declined, and 176 shares were unchanged.

Banks were knocked off after Reserve Bank of India, in a surprise move, kept key interest rates unchanged. HDFC Bank, SBI, ICICI Bank and Axis Bank are losers among bank stocks. Bankex lost over 1 percent at closing.

Sun Pharma, Lupin and TCS were losers in the Sensex while Adani Ports, HDFC, Tata Motors and M&M were gainers.

3:15 pm On Inflation RBI says:#Due to abrupt compression of demand In Nov, fall in price of perishables will become available in the reading in December (Nov CPI) #Prices of wheat, gram and sugar have been firming up #Discretionary spending on goods and services in CPI (ex of food and fuel) which is 16 percent of CPI could be impacted by restricted access to cash #Prices of housing, fuel and light, health, transport communication, pan, tobacco, intoxicants and education which is 38 percent of CPI may remain largely unaffected #Base effects expected to reverse and turn unfavourable in Dec and Feb #If usual winter moderation in food prices does not materialise then food inflation pressures could re-emerge #With OPEC’s agreement to cut production crude prices may firm up in coming months #Withdrawal of specified bank notes (SBNs) could result in possible temporary reduction in inflation of the order of 10-15 bps in Q3 #Fuller effects of house rent allowances under 7th CPC yet to be assessed and not been reckoned in this baseline inflation path

3:10 pm Governor Urjit Patel says: #Inflation outcome in Sep, Oct vindicates current stance#7th Pay Commission salaries have not been disruptive to inflation outcome#Core inflation assumes critical importance in policy#MPC felt further reduction in policy rate not warranted#Government has pro-actively responded with increasing mss limit to Rs 6 lakh crore#Banks will not have to keep additional CRR from Dec 10, 20163:05 pm Bank stocks: HDFC Bank, ICICI Bank, SBI and Axis Bank are down over 1 percent.3:00 pm Market Update: Equity benchmarks remained under pressure with the Sensex falling 146.17 points to 26246.59 and the Nifty down 38.30 points at 8104.85 after the unexpected outcome of RBI MPC.About 1490 shares declined against 1045 advancing shares on the BSE.2:50 pm Deomonetisation: RBI says Rs 11 lakh crore of old notes (Rs 500 and Rs 1,000) have come back into the system so far.Demonetisation may bring down CPI by 10-15 basis points in October-December quarter. Oil price and financial market turbulence are risk to March 2017 CPI target.2:45 pm Fed policy eyed: This bi-monthly review is set against the backdrop of heightened uncertainty. Globally, the imminent tightening of monetary policy in the US is triggering bouts of high volatility in financial markets, with the possibility of large spillovers that could have macroeconomic implications for EMEs, RBI says.

2:40 pm Incremental CRR to be withdrawn: With the enhancement in the ceiling for issue of securities under the Market Stabilisation Scheme (MSS) to Rs  6 lakh crore, it has been decided to withdraw the incremental CRR effective the fortnight beginning December 10, 2016, RBI says. The liquidity released by the discontinuation of the incremental CRR would be absorbed by a mix of MSS issuances and liquidity adjustment facility (LAF) operations, it says.On November 26, 2016 the Reserve Bank had announced an incremental cash reserve ratio (CRR) of 100 per cent of the increase in net demand and time liabilities (NDTL) of scheduled banks between September 16, 2016 and November 11, 2016 effective the fortnight beginning November 26, 2016. It was intended to absorb a part of the large increase in liquidity in the system following the withdrawal of the legal tender status of ? 500 and ? 1,000 denomination bank notes. It was also indicated that the incremental CRR was purely a temporary measure and that it would be reviewed on December 9, 2016 or even earlier. 2:36 pm RBI cuts GVA estimates: RBI says incorporating the expected loss of growth momentum in Q3 and waning effects in Q4 alongside the boost to consumption demand from higher agricultural output and the implementation of the 7th CPC award, GVA growth for 2016-17 is revised down from 7.6 percent to 7.1 percent, with evenly balanced risks.2:33 pm Market Update: Equity benchmarks fell sharply after the RBI kept all policy rates unchanged, which was completed unexpected by the street.The Sensex was down 201.29 points at 26191.47 and the Nifty down 62.70 points at 8080.45. About 1341 shares declined against 1163 advancing shares on the BSE.2:30 pm RBI policy decision: The Reserve Bank of India kept policy rates unchanged."On the basis of an assessment of the current and evolving macroeconomicsituation, the Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 percent," the RBI said in its release.Consequently, the reverse repo rate under the LAF remained unchanged at5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate at6.75 percent.The RBI said the decision of the MPC was consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 percent by Q4 of 2016-17 and the medium-term target of 4 percent within a band of +/- 2 per cent, while supporting growth.2:25 pm US policy impact on India: India with a large domestic economy will be less affected by changes in growth and monetary policy in the new set-up under Donald Trump administration, S&P Global Ratings said today.

In a report on effect of Trump's victory in the presidential elections on Asia-Pacific economies, S&P said many key US policies under the new administration remain undefined, leading to unusual uncertainty around the baseline outlook.

"The effect of changes in the US growth and monetary policy on Asia's trade and general financial market confidence, whether positive or negative, will be greater on smaller and more open economies of the region," S&P Global Ratings' Asia-Pacific Chief Economist Paul Gruenwald said.

"Countries with large domestic economies -- China, Japan, India and Indonesia -- will be less affected." S&P said it will have to wait until Trump's economic team is in place and its policy intentions become clearer before firming up its view on the effect and the associated risks on the Asia-Pacific.2:15 pm Europe Update: European stocks were higher as investors shifted their focus to an upcoming meeting of the European Central Bank (ECB), where they expect further monetary stimulus to be announced.

France's CAC, Germany's DAX and Britain's FTSE gained around a percent each.Also read - Buy, sell, hold: 9 stocks that to watch out today2:00 pm Market Check

Equity benchmarks extended gains in afternoon trade with the Nifty inching towards 8200 on hopes of rate cut by Reserve Bank of India. Banking & financials and auto stocks continued to lead the market higher.

A 25 basis points cut in repo rate seems already priced in by the market. If the RBI cuts repo rate by 50 basis points then the rally is likely to extend.

Shankar Sharma of First Global says he expects the RBI to cut repo rate by 50 basis points to 5.75 percent today but it is unlikely to make any comments on growth outlook.

The 30-share BSE Sensex was up 105.61 points at 26498.37 and the 50-share NSE Nifty rose 36.30 points to 8179.45. About 1403 shares advanced against 1067 declining shares on the BSE.HDFC jumped 2.5 percent followed by ICICI Bank, Tata Motors, SBI and M&M with 1-1.5 percent upside. However, Sun Pharma tanked 5.5 percent on the company confirmed that USFDA issued Form 483 for Halol plant post inspection.