Sensex tanks 1,307 pts, Nifty below 16,700 mark after RBI`s sudden repo rate hike

Domestic shares ended with steep losses on Wednesday, declining for the third straight day. Indices opened near the flat line, but declined sharply in the afternoon trade after the Reserve Bank of India (RBI) announced an unanticipated interest rate hike of 40 basis points.

The barometer index, S&P BSE Sensex dropped 1,306.96 points or 2.29% to 55,669.03. The Nifty 50 index lost 391.50 points or 2.29% to 16,677.60. The 50-unit index has fallen 3.29% in three straight sessions.

All the sectoral indices on the NSE ended with deep losses. Metals, consumer durables and media shares witnessed major losses.

Global stock markets were mixed as the US Federal Reserve is expected to raise interest rates Wednesday for the second time since 2018, boosting the fed funds target rate by a half-percentage point. The US Fed is also expected to launch a program to reduce its massive bond holdings by $95 billion a month, starting in June.

Selling was broad based. The BSE Mid-Cap index declined 2.63% and the BSE Small-Cap index lost 2.11%.

The market breadth, indicating the overall health of the market, was weak. On the BSE, 864 shares rose while 2,508 shares fell. A total of 103 shares were unchanged.

The NSE`s India VIX, a gauge of the market`s expectation of volatility over the near term, jumped 7.86% to 21.88.

LIC IPO:

The initial public offering (IPO) of insurance behemoth Life Insurance Corporation (LIC) of India received bids for 10.15 crore shares as against 16.20 crore shares on offer, according to stock exchange data at 17:00 IST on Wednesday (4 May 2022). The issue was subscribed 63%.

The issue opened today (4 May 2022) and it will remain open for bidding till 9 May 2022. The IPO price band is Rs 902 to Rs 949 per equity share. An investor can bid for a minimum of 15 equity shares and in multiples thereof.

RBI`s Interest Rate Shocker:

The Reserve Bank of India (RBI)`s Monetary Policy Committee (MPC) decided to hold an off-cycle meeting on 2nd and 4th May 2022 to reassess the evolving inflation-growth dynamics and the impact of the developments after the MPC meeting of 6-8 April 2022.

The MPC expects inflation to rule at elevated levels, warranting resolute and calibrated steps to anchor inflation expectations and contain second round effects.

Based on this assessment of the macroeconomic situation and the outlook, the MPC on Wednesday (4th May) voted unanimously to increase the policy repo rate by 40 basis points to 4.40%, with immediate effect.

Consequently, the standing deposit facility (SDF) rate stands adjusted to 4.15%; and the marginal standing facility (MSF) rate and the Bank Rate to 4.65%.

RBI will increase the cash reserve ratio (CRR) by 50 basis points to 4.5% of net demand and time liabilities (NDTL), effective from the fortnight beginning 21 May 2022. The withdrawal of liquidity through this increase in the CRR would be of the order of Rs 87,000 crore.

The MPC decided unanimously to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

Numbers to Watch:

The yield on India`s 10-year benchmark federal paper rose to 7.378% as compared with 7.119% at close in the previous trading session.

In the foreign exchange market, the rupee was firm against the dollar. The partially convertible rupee was hovering at 76.42, compared with its close of 76.48 during the previous trading session.

MCX Gold futures for 3 June 2022 settlement fell 0.09% to Rs 50,764.

The US Dollar index (DXY), which tracks the greenback`s value against a basket of currencies, declined 0.07% to 103.39.

In the commodities market, Brent crude for July 2022 settlement rose $4.01 or 3.82% at $108.98 a barrel. The contract fell $2.61 or 2.43% to settle at $104.97 a barrel during the previous trading session.

Foreign Markets:

The US Dow Jones index futures were up 123 points, indicating a positive opening in the US stocks today.

European markets fell across the board while Asian stocks ended mixed on Wednesday as global investors await a crucial monetary policy decision from the U.S. Federal Reserve. Markets in Japan and mainland China were closed on Wednesday for holidays.

Meanwhile, the British factory activity edged up in April after slowing to its weakest in just over a year in March following Russia`s invasion of Ukraine, but manufacturers remained wary about the outlook as costs leapt and demand faltered, a survey reportedly showed on Tuesday.

Investors kept an eye on the war in Ukraine, with the EU lining proposing additional oil sanctions on Russia as Russian forces continue to bombard targets in eastern Ukraine. The European Commission on Wednesday put forward new sanctions against the Kremlin which will include a six-month phase out of Russian crude imports.

The S&P Global/CIPS manufacturing Purchasing Managers` Index (PMI) rose to 55.8 in April from March`s 13-month low of 55.2, a slightly bigger rise than the increase to 55.3 in an earlier `flash` estimate.

Buzzing Segment:

The Nifty Bank index dropped 2.49% to 35,264.55. The index rose 0.21% in the previous session.

Among the components of the Nifty Bank index, Bank of Baroda (down 3.95%), IndusInd Bank (down 3.28%), HDFC Bank (down 3.25%), Bandhan Bank (down 2.91%), AU Small Finance Bank (down 2.86%), Axis Bank (down 2.66%), State Bank of India (down 2.55%), ICICI Bank (down 2.02%), Punjab National Bank (down 1.71%) and IDFC First Bank (down 0.77%) declined.

Kotak Mahindra Bank rose 0.09% after the private sector bank reported a 64.4% jump in standalone net profit to Rs 2767.40 crore in Q4 FY22 from Rs 1,682.37 crore in Q4 FY21. Total income in the last quarter rose by 11.8% year on year to Rs 8,892.26 crore in Q4 FY22. Operating profit before provisions and contingencies for the quarter grew by 12.7% year on year to Rs 3,339.90 crore in quarter ended March 2022.

Stocks in Spotlight:

Tata Steel fell 2.60%. The steel major reported consolidated net profit of Rs 9,835 crore in Q4 FY22 from Rs 7,162 crore in Q4 FY21. Turnover for the quarter ended March 2022 stood at Rs 69,324 crore, rising from Rs 50,028 crore posted in Q4 FY21. The company recommended a dividend of Rs 51 per share for the financial year ended 31 March 2022. The company`s board also recommended a 10:1 stock split.

Titan Company slumped 4.11%. The Tata Group company reported 7.18% decline in standalone net profit to Rs 491 crore in Q4 FY22 from Rs 529 crore in Q4 FY21. Total income for the quarter ended March 2022 stood at Rs 7,352 crore, rising 3% from Rs 7,169 crore posted in Q4 FY21.

Britannia Industries advanced 3.32%. The FMCG major reported 4.3% rise in consolidated net profit to Rs 379.87 crore on a 15.5% increase in net sales to Rs 3,508.35 crore in Q4 FY22 over Q4 FY21.

Mahindra & Mahindra Financial Services lost 1.13%. The company`s net profit surged to Rs 601 crore in Q4 FY22 from Rs 150 crore in Q4 FY21. The company attributed the jump in the profitability to a reduction in GS-3, which led to significant credit cost reversal. Total income declined 6.5% to Rs 2,466.36 crore in Q4 FY22 from Rs 2,637.51 crore in Q4 FY21.

Hero MotoCorp slipped 3%. The two-wheeler major`s standalone net profit declined 27.51% to Rs 627.05 crore on 14.55% fall in net sales to Rs 7,421.73 crore in Q4 March 2022 over Q4 March 2021.

Adani Enterprises fell 3.90% after the company posted 15.7% decrease in consolidated net profit to Rs 304.32 crore in Q4 FY22 as against Rs 360.93 crore in Q4 FY21. Net sales in the fourth quarter stood at Rs 24,865.52 crore as against Rs 13,525.07 crore reported in the same period last year.

Ramkrishna Forgings tumbled 4.19%. The company`s standalone net profit jumped 142.9% to Rs 86.65 crore on a 31.9% rise in revenue from operations to Rs 683.24 crore in Q4 FY22 over Q4 FY21.

SBI Cards and Payments Services fell 4.30%. The company said that Nalin Negi has tendered his resignation from the post of chief financial officer (CFO) of the company.

RailTel Corporation of India declined 1.48%. The company has received work order of Rs 107.44 crore from South Western Railway (SWR).

Cosmo Films jumped 6.69%. The company`s board will consider issuing bonus shares on 9 May 2022. At the same meeting, the board will also consider the audited financial results for the quarter and year ended 31 March 2022.

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