Indian market witnessed pared gains and slipped in red after the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to maintain a status-quo stance on rates as against a 25 bps rate cut which was widely expected.
It kept key policy rates unchanged at 5.15 percent, and the reverse repo rate unchanged at 4.9 percent.
The RBI also flagged weakness in the global economic activity, elevated trade tensions, and geopolitical uncertainty. The governor also highlighted concerns on the slow transmission of rate cuts to the end consumer.
The transmission has gained some momentum in recent weeks, with the weighted average lending rate on fresh rupee loans sanctioned by banks declining 44 basis points. Remember, RBI has slashed interest rates by 135bps since Feb 2019.
The RBI raised its headline CPI inflation projection to 4.7-5.1% in H2 FY20 and revised GDP growth forecast downwards for FY20 to 5.0% from 6.1% earlier.
The only silver lining is that RBI has kept the door open for further monetary action (depending on incoming data) and has maintained its “accommodative stance”. Most experts see a 25 bps rate cut in the February meeting.
The central bank also expects stronger monetary transmission under the external benchmarking regime, which was introduced from October 1. RBI Governor Shaktikanta Das said in a press briefing that the pause on rates is “temporary”.
Let’s look at the final tally on D-Street – the S&P BSE Sensex fell 70 points to 40,779 while the Nifty50 closed 24 points lower at 12018.
Sectorally, the action was seen in IT, Consumer Durables, and Capital Goods stocks while on the losing front, telecom, metals, public sector indices witnessed selling pressure.
In the broader market space – the Midcap index was down 0.32 percent while the Small-cap index outperformed as it rose 0.02 percent.
Top Nifty gainers: ITC, TCS, and ZEE Entertainment
Top Nifty losers: Coal India, JSW Steel, and Cipla
Stocks & Sectors:
Sectorally, the S&P BSE IT index rose 1.03 percent, followed by the S&P BSE Consumer Durables index which was up 0.69 percent, and the S&P BSE Capital Goods index gained 0.64 percent.
On the losing front, the S&P BSE Telecom index fell 2.6 percent, the Metal index was down 2.3 percent, and the Public Sector index fell 1.2 percent.
Volume spike of 100-400% was seen in stocks like Titan, SRF, Container Corp, InterGlobe Aviation, and Tata Elxsi.
Long Buildup – Tata Elxsi, Equitas, Just Dial
Short Buildup – IGL, Indigo, and Godrej Consumer Products
Stocks in news:
HDFC AMC: HDFC AMC share price declined 3 percent on December 5 after the company said it will use a greenshoe option for sale of an additional 0.86 percent stake via offer for sale (OFS).
Kesoram Industries: Kesoram Industries ended over 8 percent higher on December 5 after it received a certified copy of NCLT order for a scheme of arrangement for demerging its tyre business.
Bharti Airtel: Bharti Airtel fell 2 percent on December 5 after the company approved raising $3 billion via debt and equity.
Rate sensitive stocks end mixed: The rate-sensitive sectors including Nifty Auto and Bank Nifty closed in the red while the real estate space ended in the green. Top auto losers were Hero Moto, Maruti, Tata Motors and Ashok Leyland while the top losers from the banking space were IndusInd Bank, PNB, RBL Bank, SBI and YES Bank.
Technical View:
Nifty formed a Bearish candle on the daily charts but held on to its crucial support at 12000
The index failed to hold on to 5-days EMA placed at 12032
Despite forming a small bearish candle, the trade setup still remain positive
As long as Nifty holds above 11950 levels, bulls should remain in control, suggest experts.
On the upside, if the index manages to sustain above 12081 levels in the next trading session then the upswing can get extended upto 12113 kinds of levels while a close below 11998 could drag it towards 11950-11900.
Three levels to watch on Friday – 11,998, 12,081, 12,158
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