Rate sensitive stocks crack post RBI's hawkish commentary, DMK's pull-out

NEW DELHI: Rate sensitive stocks such as banks, autos and real estate stocks plunged fell sharply on Tuesday, after the Reserve Bank of India, on expected lines, cut the repo rate by 25 basis points, but said that there is limited headroom for further easing.

“The 25 basis point rate cut by RBI was in line with expectation, and we expect in fiscal year 2014, RBI will cut interest rates by another 50 basis points,” says Sonam Udasi, Head of Research, IDBI Capital

“The concerns over current account deficit (CAD), will hold RBI from any aggressive rate cuts” added Udasi.

The hawkish commentary by the RBI that there is limited headroom for further easing despite pro-growth stance is hurting sentiment, say analysts.

“The 25 basis point rate cut by RBI was in line with expectation, we expect in fiscal year 2014, RBI will cut interest rates by another 50 basis points, the concerns over current account deficit (CAD), will hold RBI from any aggressive rate cuts” Sonam Udasi, Head of Research, IDBI Capital.

DMK pulling out of UPA government put further pressure on the markets. Both Sensex and Nifty slipped below their key support levels post the announcement.

At 11:40 a.m.; the 50-share index was at 5,740.15, down 94.10 points or 1.6 per cent. It touched a high of 5,863.60 and a low of 5,724.30 in trade today.

The BSE S&P Sensex was at 19,001.04, down 300.16 points or 1.50 per cent. It touched a high of 19,378.61 and a low of 18,939.47 in trade today.

At 11:30 am, BSE Banking Index was trading 1.73 per cent lower, led by losses in ICICI Bank which was down 1.3 per cent, followed by the HDFC Bank , which slipped 2.09 per cent and the State Bank of India was down 1.98 per cent.

BSE Auto Index was trading 0.75 per cent lower, led by losses in Hero MotoCorp which was down 2.6 per cent, followed by M&M which slipped 1.56 per cent and Tata Motors was trading 1.01 per cent lower.

BSE Realty Index was trading 1.43 per cent lower, led by losses in DLF which was down 1.46 per cent; HDIL, which dropped 2.03 per cent and Godrej Properties, was trading 1.46 per cent lower.