Business | Markets
Sensex trims early lead on RBI's move
India's main stock index reversed early gains and closed 0.3 per cent lower yesterday, after the central bank kept interest rates unchanged at its policy review, disappointing investors.
- Reuters
- Published: 23:39 January 29, 2008
Mumbai: India's main stock index reversed early gains and closed 0.3 per cent lower yesterday, after the central bank kept interest rates unchanged at its policy review, disappointing investors.
The central bank said inflation risks persisted, but analysts said it was leaving the door open for a rate cut if market turmoil threatened growth and financial stability.
Just over half the analysts polled by Reuters had forecast the central bank would cut its key lending rate by 25 basis points from 7.75 per cent after the US Federal Reserve axed 75 basis points from the federal funds rate last week.
The 30-share BSE index ended down 0.34 per cent, or 60.8 points, at 18,091.94, with 13 of the components falling. The benchmark had risen as much as 1.9 per cent in morning trade on hopes for a rate cut, but fell more than one per cent after central bank announced the policy at noon.
Positive sign
RK Gupta, managing director at Taurus Asset Management in New Delhi, said the market's recovery from the day's low was a positive sign. "It gives me a feeling that we are near the bottom," he said. "Markets should start rising from next week after the derivatives expiry."
ICICI Bank and State Bank of India along with engineering firm Larsen & Toubro led the losses.
Gupta said he had toned down expectations for a rate cut after the central bank said on Monday inflation risks from high international oil and food prices continued.
The 50-share NSE index closed 0.13 per cent up at 5,280.80.
Reliance Power, which received bids for $190 billion in its $3 billion initial public issue, is expected to start returning money to unsuccessful bidders from next week, Gupta said. "That will boost liquidity. And if another rate cut happens in the US, that will mean more money will flow to India," he said.
Foreign funds
Data showed foreign funds bought $166 million of shares on Friday, their first net purchases since Jan. 14. The funds had dumped $3.6 billion of stocks in the seven sessions to Thursday.
ICICI Bank dropped 4.2 per cent to Rs1,220.30, State Bank of India lost 3.6 per cent to Rs2,225.10 and HDFC bank shed 3.4 per cent as the steady rates could dampen demand for loans.
The BSE bank sector index fell 3.48 per cent.
Better-than-expected quarterly profit at car maker Maruti Suzuki helped the stock pare losses to 0.6 per cent at Rs857.20 at the close.
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