Banks, auto, realty stocks tank as RBI maintains 'status-quo'

NEW DELHI: Rate sensitive stocks in sectors such as banks, autos and realty stocks extended losses in morning trade on Monday, after the Reserve Bank of India ( RBI) in its mid-quarter review of Monetary Policy 2013-2014 decided to maintain status quo on both the repo rate and cash reserve ratio.

Despite the considerable moderation in WPI inflation, analysts at most brokerage firms believed that the RBI may not ease policy rates today as upside risks to inflation on rupee weakness, increase in administered prices.

At 11:15 a.m.; the BSE Banking Index was trading 0.79 per cent lower, led by losses in Axis Bank, which was down 1.6 per cent, ICICI Bank dropped 1.67 per cent and SBI was down 1.85 per cent.

Most rate sensitive stocks appreciated in last few week on the back of strong macro economic data which cemented hopes of a rate cut in June policy meet.

However, considerable fall in rupee and reversal of FII inflows two weeks ago put the rate cut in doubt, said analysts.

Jahangir Aziz, Chief Economist for India, JPMorgan was of the view that the RBI might not cut policy rates any further fearing that it could trigger another bout of debt outflows and make it cheaper to short the rupee.

The rupee collapsed to a historic low of 58.98 to the US dollar, but recovered to close at 57.53 last week. The yield on the benchmark 7.16% government bonds rose 24 bps to 7.33% from a recent low of 7.09% on May 17.

The S&P BSE Realty index dropped 1.06 per cent ahead of the event, led by losses in Unitech, which was down 2.3 per cent followed by the HDIL and DLF which were down 2.6 per cent and 1.05 per cent respectively.

The BSE Auto Index slipped in red after making a positive start, led by losses in Tata Motors, which was trading 2.2 per cent lower at Rs 290.35, followed by Ashok Leyland, which dropped 2 per cent and the Maruti Suzuki was down 0.4 per cent.