Sensex slumps 470 pts ahead of key GST Council meeting

Amid mixed signal by the US central bank on further quantitative easing and no major announcement in the Cabinet Meeting on Wednesday, the domestic equity market witnessed heavy selling pressure on Thursday. The market also remained cautious before the GST Council meeting today, though it doesn't expect major sops for the auto sector from it.

The BSE Sensex on Thursday failed to hold on to the marginal gains from the Wednesday's session as the index shed 576.08 points intra-day. It, however, closed 470.41 points, or 1.29%, lower at 36093.47. NSE Nifty 50, too, fell 170.4 points in the day's session before closing 135.85 points, or 1.25% lower at 10704.80.

The US Federal Reserve cut its benchmark lending rate by 25 basis points, however the Fed signal of a higher bar to further reductions in borrowing costs did not go too well with the market as the overseas investors net-sold Rs 892.52 crore on Thursday.

Of the 30 stocks in Sensex, 26 fell, with major losers being YES Bank, Tata Steel, IndusInd Bank, ICICI Bank, Maruti Suzuki India and State Bank of India, losing up to 15.52%. Major gainers were Tata Motors, HDFC Bank, Bharti Airtel and Asian Paints, gaining up to 1.97%.

All Nifty sectoral indices ended in the red, led by Media (-4.41%), followed by PSU Bank (-2.25%), Private Bank (-1.8%) and Metal (-1.63%).

Shrikant Chouhan, senior vice president, equity technical research, Kotak Securities, said, "Since the last eight weeks, even though the broader trend was negative, we saw positive closing on the day following weekly expiry. The chances of the same are bright on Friday as well. Nifty is in the process of reaching its previous low, which is at 10637, however, as per option data, it is turning oversold. On the street, the feeler about the market is very low, which could be an excellent opportunity to buy in select large-cap companies with a medium-term view."

Nagaraj Shetti, technical research analyst, HDFC Securities, said, "After showing a consolidation type pattern in the last session, the Nifty continued with sharp weakness today and closed the day lower by 135 points. Further weakness below from here could lead Nifty towards the crucial support zone of around 10600-550 levels (previous swing low of January and February 19) and the chances of upside bounce could be alive, as long as this area holds."

YES Bank was the major loser among the Sensex pack after rating agency Moody's said real estate financier Altico Capital India's default is credit negative for banks with significant exposure to real estate sector. YES Bank and IndusInd Bank, according to Moody's, have the largest direct exposure to commercial real estate and they would be susceptible to asset quality difficulties if the real estate sector continues to slow. Meanwhile, Morgan Credits, part of the promoter group of YES Bank, has informed the exchanges that it has sold a 2.3% stake in the bank and the proceeds would be solely used to prepay a substantial portion of its outstanding NCDs subscribed by various schemes of Reliance Nippon Life Asset Management.

Care Ratings in a note said the impact of the rate cut by Fed Reserve on India would be indirect.

"Lower rates in the US at the margin would make emerging markets more attractive for foreign investors and even if the RBI lowers the repo rate, the interest rate differential will be maintained. The US dollar improved marginally from $ 1.11/€ to $ 1.10/€. This can have an impact on other currencies including the rupee though with the oil imbroglio on, it may be difficult to separate the cause and effect of currency movements,' the note said.