Indian shares fell more than 2 per cent on Tuesday, posting their biggest percentage drop in nearly two months, as investors booked profits in banking stocks after the Reserve Bank of India cut repo rate by 25 bps as widely expected.
The 30-share BSE index Sensex plunged 516.06 points or 2.03 per cent to 24,883.59 and the 50-share NSE index Nifty dropped 155.6 points or 2.01 per cent to 7,603.20.
Among rate sensitive scrips, ICICI Bank topped the list by falling 5.45 per cent, followed by SBI by 5.38 per cent, Axis Bank 2.89 per cent and HDFC Bank 1.03 per cent.
All BSE sectoral indices ended in the red. Among them, banking index fell the most by 3.21 per cent, followed by auto 2.82 per cent, metal 2.81 per cent and infrastructure 2.73 per cent.
Top five Sensex losers were Adani Ports (-6.23%), ICICI Bank (-5.45%), State Bank of India (-5.38%), Bharti Airtel (-5.03%) and Tata Motors (-4.52%), while the only gainer was Lupin (+0.12%).
Further rate cuts
Besides cutting rates by 25 basis points to a more than five-year low, the Reserve Bank of India also dangled the prospect of another cut later this year if inflation trends stay benign.
Traders also welcomed other measures announced in the policy review, including reducing the cash proportion of banks' reserve requirements that must kept with the central bank, while also pledging to inject more long-term liquidity.
But they also felt these moves would play out in the longer term and said the 25 bps price cut had already been priced into markets.
“We feel the measures taken would tantamount to more than a 25 bps repo rate cut. But this would take time to sink into the markets,” Arun Gopalan, Vice-President, Research, Systematix, said.
“This leaves little to celebrate in the immediate term, therefore the markets would offer a tepid reception to the policy. But we feel the measures would allow better transmission and so it would reflect in the markets over time.”
Global markets
The dollar fell on Tuesday to its weakest against the yen since October 2014 as investors' view of riskier assets soured, pushing shares and oil prices lower as the outlook for US interest rates remained clouded.
Asian markets
Asian shares and other riskier assets skidded on Tuesday, pressured by slumping crude oil prices and mixed messages from Federal Reserve policymakers on the outlook for US interest rate rises.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.3 per cent. Japan’s Nikkei stock index dropped 2.1 per cent to six-week lows, as the perceived safe-haven yen rallied.