India’s equity benchmark broke its best stretch of weekly gains since April, as investors assessed the outlook after the central bank on Thursday cut its economic forecast and unexpectedly kept interest rates unchanged.
The S&P BSE Sensex Index declined 0.8% to 40,445.15 points at the close in Mumbai.
The gauge fell 0.9% for the week, ending a five-week winning streak. The NSE Nifty 50 Index also fell 0.8% today.
Foreign investors have pumped $13.2bn in India stocks so this year, exceeding the highest annual inflow since 2014, according to data compiled by Bloomberg. The Sensex is retreating from a record high close on November 28.
“RBI’s decision to pause on rate cuts is accentuating investors’ concern about economic growth, and therefore we are seeing some selling pressure,” said Chokkalingam G, managing director and founder at Equinomics Research & Advisory in Mumbai. “Selling may continue for some time in highly valued large stocks, he added.
“Lower lending rates are unlikely to lift growth unless demand and sentiment also improve, perhaps from fiscal measures in the Feb Budget as the RBI appears to suggest,” Jefferies Financial Group Inc strategists including Somshankar Sinha wrote in a note on Thursday. “India’s extended valuations may already be pricing some of this in, though, leaving us defensive,” the note added.
“The recent decline shows disappointment among the participants post the RBI policy outcome as the majority were hoping for a rate cut,” said Ajit Mishra, vice president of research at Religare Broking Ltd “Since the Nifty has breached its immediate support at 11,900, we may see further profit taking ahead.”
Eighteen of 19 sector sub-indexes compiled by BSE Ltd rose, led by a gauge of auto stocks.
Interest rate sensitive stocks including State Bank of India Ltd and Tata Motors Ltd were among the top losers on the benchmark.
Meanwhile the Indian rupee yesterday opened higher but soon erased all gains and was trading lower against the US dollar. The domestic currency was trading at 71.33 a dollar, down 0.05% from Thursday’s close of 71.29. The Indian unit had opened at 71.26 a dollar.
Traders await US jobs data report due later, and track developments on the US-China trade deal front.
The Indian rupee rose sharply in the last hour of trade on Thursday after the Reserve Bank of India (RBI) promised to continue with its accommodative stance in its monetary policy. The central bank kept its key interest rates unchanged amid inflationary concerns, a move that surprised investors who were expecting at least 25 basis points cut in the policy rate.
Many analysts believe that the RBI might have taken a pause observing the fiscal slippage, impact of telecom price increases on inflation, while awaiting some amount of rate transmission of earlier cuts.
In the year so far, the rupee weakened 2.13%, while foreign investors have bought nearly $13.18bn in Indian equities and $4.42bn in debt.
The yield on the 10-year Indian government bond was at 6.602% compared with its previous close of 6.613%. The benchmark equity index Sensex rose 0.3% at 40894.10 points. Year to date, it has gained 13.06%.
Asian currencies were trading higher as US President Donald Trump suggested trade talks with China were making progress ahead of 15 December when the next tranche of US tariffs kick in.
Indonesian rupiah was up 0.24%, Philippines peso 0.18%, Malaysian ringgit 0.08%, Japanese yen 0.06%, and Thai Baht 0.05%. China Offshore was down 0.1%, and South Korean won and China renminbi were down 0.05% each.
The dollar index, which measures the US currency’s strength against a basket of major currencies, was at 97.367, down 0.04% from its previous close of 97.41.
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