The BSE Sensex lost 792.17 points on Friday to close at 34,376.99, dragged by oil and financial stocks, after the RBI kept the repo rates unchanged but changed its stance to "calibrated tightening" from "neutral". With the rupee breaching the 74-mark and the government asking oil marketing companies to absorb the cost of fuel cuts further pulled the markets down. NSE Nifty 50 closed 282.80 lower at 10,316.45.
The BSE Sensex touched an intra-day low of 34,202.22, while Nifty 50 fell to an intra-day low of 10,261.90 before recovering slightly to the current levels.
While S&P BSE Energy closed 8.52% lower at 3,901.22, S&P BSE Oil & Gas ended 12.68% lower at 12,143.59 and S&P BSE Finance closed 2.38% lower at 5,290.89. Shares of oil marketing companies fell sharply as the government decision is expected to hurt their profitability.
Shares of Hindustan Petroleum Corporation tanked 25.18%, followed by Bharat Petroleum Corporation which fell 21.11%, Indian Oil Corporation fell 16.19%, ONGC fell 15.93% and Oil India fell 10.57%.
In an unexpected move, the Reserve Bank of India (RBI) kept the benchmark interest rate unchanged at 6.5%. Analysts said the market was expecting a rate hike to shore up the weakening rupee and combat the inflationary pressure arising from high oil price. The central bank, however, affirmed to its commitment towards achieving the medium-term objective of containing price hike.
AK Prabhakar, head-research, IDBI Capital said: "This is not going to stop in a hurry, it will take time." With a weakening rupee and upcoming state elections, investors would like to take capital out of markets, hence the carnage is going to continue, he said.
Nifty may again touch the 9,950-level, its lowest this year, he said. On March 23, Nifty touched 9,951.90. "If that happens, panic will increase," he added.
Prabhakar is not expecting any "recovery" till Diwali as investors would look to protect their capital at a time when macros are turning negative. "No change in rate has impacted the market today."
According to him, the correction in oil stocks make oil marketing companies attractive to investors and the trend may continue till state elections are over.
Gautam Duggad, head of research- institutional equities, Motilal Oswal Financial Services said the market correction is largely driven by macro concerns around rising crude prices and depreciating currency and consequent "deleterious impact" for twin deficits.
"Rising bond yields and concerns around liquidity tightening is also keeping the markets anxious," he added.
According to Vinod Nair, head of research, Geojit Financial Services, selling intensified across sectors as apprehensions over currency and yield turned to reality due to deteriorating macros. Oil & Gas sector was worst hit, as it lost 18% this week, even though their valuations will still remain expensive.
He said the equity market outlook has taken a beating given degradation in the quality of debt, redemption and heightened risk-averseness by investors.
"Trend is likely to be negative at least in the near-term till the financial market stabilises. Key data like bond yield, rupee, oil prices, liquidity and equity valuation have to normalise which may take some more time," he added.
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While S&P BSE Energy closed 8.52% lower at 3,901.22, S&P BSE Oil & Gas ended 12.68% lower at 12,143.59 and S&P BSE Finance closed 2.38% lower at 5,290.89. Shares of oil marketing companies fell sharply as the government decision is expected to hurt their profitability.
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