Sensex drops 131 pts as recession fears overwhelm RBI mega rate cuts

Mumbai, Mar 27 () Market benchmark BSE Sensex closed lower by 131 points or 0.44 per cent in volatile trade on Friday, cutting short its three-day winning run due to deepening growth concerns and a less-than-expected moratorium on loans announced by the RBI in its monetary policy.

Stock markets had rallied around 4 per cent in opening trade in line with firm global markets and ahead of the RBI governor's address.

However, stocks lost steam after the policy announcement with the benchmark indices paring sharp gains.

The 30-share Sensex ended 131.18 points or 0.44 per cent lower at 29,815.59. It hit a high of 31,126.03 and a low of 29,346.99 in day trade.

The broad-based NSE Nifty managed to end with gains, closing higher by 18.80 points or 0.22 per cent at 8,660.25 as energy, FMCG and select banking stocks advanced.

On a weekly basis, both the indices closed in the red, marking their sixth week of losses due to heavy selling after lockdowns in major economies to contain coronavirus spread.

"In such uncertain times, instead of fresh funds entities want to save their skin, RBI's relaxation of only 3 months instead of 6 months for a moratorium on interest on loans and working capital has disappointed many," Jimeet Modi, Founder and CEO, Samco Securities said.

In a bid to support the economy during the pandemic, RBI Governor Shaktikanta Das unveiled a slew of measures, including its steepest interest rate cuts in more than 11 years. The repo has been cut by 75 basis points to 4.4 per cent - the lowest in at least 15 years.

Further, the Reserve Bank reduced the cash reserve ratio (CRR) for all banks by 100 basis points to 3 per cent to release Rs 1.37 lakh crore across the banking system. It also allowed banks to put on hold monthly instalment payments on all term loans for three months.

The RBI is playing every card in its pocket to prevent a crisis-like situation by giving banks the ability to lend more, but as such no direct helping hand has been given to ailing industries as of now, Modi observed.

"Indices ended almost flat following the RBI measures. The markets were up in the last two sessions on expectations of these announcements from the government and the RBI. Now, focus comes back on the spread of the virus and its damage on the already reeling economy," Vinod Nair, Head of Research at Geojit Financial Services said.

Bajaj Finance was the biggest loser in the Sensex pack, tanking up to 8 per cent, followed by Hero MotoCorp, IndusInd Bank, Maruti and HCL Tech.

Axis Bank, ITC, NTPC and M&M were among the top gainers.

Sector-wise, BSE bankex, metal, power, IT and healthcare indices ended on a positive note while BSE telecom, auto, oil and gas, basic materials and realty indices ended in the red.

Broader BSE midcap closed 0.29 per cent lower, while smallcap rose by 0.28 per cent.

Despite massive rate cuts, the domestic market turned negative on concerns over the annual economic growth amid rising uncertainty over the COVID-19 pandemic, traders said.

Announcing the decisions of the Monetary Policy Committee (MPC), RBI Governor Das said that no projection for growth and inflation was being given in view of the uncertainty created by the outbreak of the deadly virus.

He further said that the growth projection of 4.7 per cent for the fourth quarter of 2019-20 and 5 per cent for the whole fiscal was "at risk."

Rating agency ICRA said that despite the RBI's mega push, the GDP is likely to contract by 4.5 per cent in April-June and would rise by just 2 per cent in 2020-21 on the coronavirus impact.

Joseph Thomas, Head of Research - Emkay Wealth Management said that at the current juncture the growth variables are solely dependent on how quickly a cure for COVID-19 is found and the world is able to control the pandemic.

Meanwhile globally, bourses in Shanghai, Hong Kong, Tokyo and Seoul ended higher, while benchmarks in Europe were trading in the red.

International oil benchmark Brent crude fell 2.20 per cent to USD 25.76 per barrel in futures trade.

On the currency front, the rupee depreciated marginally to 75.20 against the US dollar in intra-day trade.

The death toll due to COVID-19 rose to 17 in the country on Friday and the number of coronavirus cases climbed to 724, according to the Health Ministry.

The number of deaths around the world linked to the new coronavirus has crossed over 24,000. ANS MRMR