Mumbai, India (BBN) – Indian shares retreated on Tuesday from four-month highs hit in the previous session as investors stayed on the sidelines ahead of the central bank’s policy meeting.
Analysts expect the Reserve Bank of India to cut the repo rate by 25 basis points on Wednesday after December inflation hit a two-year low, reports The Hindu Business Line.
But they warn it will be a close call since the central bank may even opt to maintain status quo until its next review in April.
The RBI may keep rates unchanged as it continues to assess the impact of the crackdown on high-value notes on inflation, some analysts said.
Most automakers were down, contributing to over three-fourths of NSE index’s decline, with Tata Motors Ltd and Mahindra & Mahindra Ltd falling as much as 2.4 per cent and 1.7 per cent respectively.
Ashok Leyland fell 1.4 per cent, Bosch 0.78 per cent and Bharat Forge 0.70 per cent.
Maruti was the sole gainer on the auto indices on both the BSE and the NSE.
Banks have already slashed lending rates this year after deposits surged following the ban on high-denomination currency notes, reducing the need for further rate cuts.
“I don’t think that the RBI will cut interest rates this time,” says Sangeeth V, an institutional sales trader with Paterson Securities.
“Banks are already flush with funds post-demonetization.”
The broader NSE index was down 0.41 per cent or 35.90 points at 8,765.15 at about 2.30 pm while the benchmark 30-stock BSE index was trading 0.49 per cent or 139.89 points lower at 28,299.39.
Tata Motors, Reliance Industries, ICICI Bank and Coal India pull Sensex down.
On Monday, both the indexes hit their highest since late September.
Among the gainers, ITC Ltd rose to a record high. Government-owned Specified Undertaking Of The Unit Trust Of India sold a two-per cent stake in the country’s biggest cigarette maker via block deals.
Railway coach maker Titagarh Wagons Ltd rose as much as 7 per cent after getting a contract worth one billion rupees from the Ministry of Earth Sciences.
Some buying activity was seen in power,consumer durables and capital goods stocks.
Volatility was up 1.69 per cent with the India Vix quoting at 13.6250.
The 30-share index had gained 783.32 points in the past four sessions.
The advances to declines ratio was tilted towards declines. On the Nifty, 36 stocks declined against 14 that advanced. On the Sensex, 22 stocks declined against 8 that advanced.
On the metals index, Coal India was down 3.20 per cent, Hindalco was down 2.18 per cent and JSW Steel 1.64 per cent.
Tata Motors, Coal India, ONGC, Adani Ports, Lupin and GAIL were down by up to 3.58 per cent on the Sensex.
Maruti, NTPC, L&T, ITC and HDFC lent support with gains of up to 0.84 per cent.
Brokers said that apart from profit-booking in recent gainers, a weak trend in other Asian bourses following overnight losses in the US and European markets, cut short the four—day march of the doemstic bourses.
Besides, caution prevailed ahead of RBI monetary policy review tomorrow which cast a shadow on sentiments, they added.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs. 449.52 crore yesterday, as per provisional data released by the stock exchanges.
European shares rose on Tuesday pushing the benchmark STOXX 600 back slightly into positive territory for the year with some encouraging company updates and gains in healthcare stocks helping to counter weakness in oil majors and eurozone banks.
Appetite for Asian stocks and the euro ebbed on Tuesday as a rising tide of economic and political concerns added to anxiety over expectations China’s foreign exchange reserves fell again in January.
MSCI’s broadest index of Asia-Pacific shares outside Japan was fractionally lower, while Japan’s Nikkei closed down 0.35 per cent.
US stocks slipped on Monday, led by the energy sector as oil prices dropped, while investors awaited the next run of major earnings reports and sought further clarity on President Donald Trump’s economic policies.
A report by IFA Global said: “Asian stock markets are trading in the red, with Hang Seng index trading lower by 2 points and Nikkei index is trading lower by 85 points following sluggishness in global equities and amid risk-off sentiment.
US stock markets closed on a negative note, the Dow Jones Industrial Average closed lower by 19 points and Nasdaq index closed marginally higher by 3 points.
US equities closed lower as investors try to make sense of US President Donald Trump’s policy noise.
European stock markets closed lower, with FTSE closed lower by 16 points and CAC lower by 47 points.
European markets ended the day lower after European Central Bank President Mario Draghi testified before the European Parliament.”