Indices post biggest fall in 6 months as inflation

By Administrator_ India

Capital Sands

India’s benchmark indices on Thursday posted their biggest single-day drop in about six months as concerns over inflation, valuations, and policy normalization by the RBI triggered risk-off bets. The sentiment was further dented by Morgan Stanley’s downgrading of Indian equities, becoming the latest foreign brokerage to sound a note of caution about the domestic market.

The Sensex closed at 59,984, down 1,158 points, or 1.9 percent — the biggest decline since April 30. The index slipped below the 60,000 mark after 13 trading sessions. This was also its sixth-biggest fall of the year. The Nifty50 index fell 353 points, or 1.9 percent, to finish at 17,857. The India VIX index soared 6.5 percent to 17.9 amid the expiry of derivatives contracts.

Most Asian markets fell on Thursday, with India witnessing the biggest decline. Banking stocks, which have the highest weighting in the benchmark indices, led to the fall. The Bank Nifty index dropped 3.34 percent, with ICICI Bank, Kotak Bank, and Axis Bank falling around 4 percent each.

Market experts said investors were spooked by the RBI’s plan to drain cash from the banking system.

The central bank on Wednesday announced its plans to conduct its first 28-day variable rate reverse repo (VRR) auction on November 2 for Rs 50,000 crore. Analysts termed the announcement a measure to remove excess liquidity from the system for a longer period and said it might moderate liquidity-led gains in the equity markets. At present, VRR auctions are for 14 days.

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