Markets fall on fading hopes of December rate cut by RBI

The Sensex fell 984 points or 1.25 per cent, its second straight day of losses. Meanwhile, registering its fifth day of decline, the Nifty tumbled 324.40 points or 1.36 per cent to 23,559.05, the lowest since June.

Bengaluru: The benchmark BSE Sensex and NSE Nifty tumbled more than 1.2 per cent on Wednesday, on the back of a 14-month high retail inflation number quelling hopes of a December rate cut, and unabated foreign fund outflows.

The Sensex fell 984 points or 1.25 per cent, its second straight day of losses. to close at a more than four-month low, following heavy selling in banking, auto and capital goods shares. In two days, investors in the 30-share Sensex have lost Rs 13.07 lakh crore.

Meanwhile, registering its fifth day of decline, the Nifty tumbled 324.40 points or 1.36 per cent to 23,559.05, the lowest since June.

“Relentless selling by Foreign Institutional Investors (FIIs) amid weak corporate earnings and a sharp surge in domestic inflation to a 14-month high have further impacted investor sentiment, dashing hopes for a near-term rate cut by the RBI,” said Vinod Nair, Head of Research, Geojit Financial Services.

India’s headline retail inflation rose to 6.21 per cent in October driven by a sharp jump in food prices, especially vegetables, official data showed on Tuesday. This may force the Reserve Bank of India to further delay interest rate cuts. Many analysts were earlier expecting the RBI’s Monetary Policy Committee to cut rates at its next meeting in December, especially after a change in stance in the October meeting. That is now unlikely to happen.

Till end of last week, FIIs have offloaded Rs 1.41 lakh crore worth of Indian stocks in just 29 days. They sold equities worth Rs 3,024.31 crore on Tuesday, according to exchange data.

“Mid and small-cap stocks were the worst hit, while the financial and auto sectors also showed significant weakness. This trend is mirrored across all emerging markets, as markets are jittery about future US policy actions, including trade-related implications for the world economy, which is reflected in the strengthening US dollar and rising yields,” Nair said.

The BSE Smallcap100 index slumped 3.08 per cent and the Midcap100 closed down 2.56 per cent on Wednesday.

The 50-stock Nifty is now 10.34 per cent below the record high it hit on September 27, confirming that the index is in a technical correction.

“Nifty has fallen for the fifth consecutive session, officially entering correction territory with a 10 per cent drop from its recent high. Increased cash market volumes on the NSE suggest that local investors are engaging in bottom-fishing activities,” said Deepak Jasani, Head of Retail Research at HDFC Securities.

From the 30-share Sensex pack, Mahindra & Mahindra, Tata Steel, Adani Ports, JSW Steel, IndusInd Bank, Reliance Industries, HDFC Bank and Kotak Mahindra Bank were the biggest laggards.

In Asian markets, Seoul, Tokyo and Hong Kong settled lower while Shanghai ended in the positive territory. European markets were trading higher. The global oil benchmark Brent crude climbed 0.93% to $72.56 a barrel.