02/06/2015

www.business-standard.com/article/printer-friendly-version?article_id=115060200605_1

3 reasons why the Sensex slipped over 600 points

today
Here are three reasons why the Sensex slipped over 600 points today
Puneet Wadhwa | New Delhi June 02, 2015 Last Updated at 14:55 IST
Despite the cut in repo rate by the Reserve Bank of India (RBI) in its
second bi-monthly Monetary Policy review on Tuesday, the S&P BSE
Sensex lost 2.2%, or 600 points in intra-day deals. The CNX Nifty, too,
lost 2.2%, or 183 points to 8,249 levels.
Among the top losers were the Interest rate sensitive stocks banks,
autos and realty. On the National Stock Exchange (NSE), the Bank Nifty
and CNX Auto indices lost nearly 3% and 2.1% respectively till 2:45pm.
Image via Shutterstock

CNX Realty index also cracked 3.2%. The worst hit, however, was the
CNX PSU Bank index that slipped around 4%.

Also Read: RBI cuts repo rate 25 bps to 7.25%

Markets fell for the day despite a 25bps rate cut by the RBI. This was on the expectations of an extended
pause by the RBI going ahead and the forecast of a weaker monsoon as compared to the IMDs May forecast.
Monsoon is now expected at 88% of long period average (LPA). Apart from monsoons, the recent rise in oil
prices and developments in Greece will remain the focus areas and may impact sentiments in the short term," said
Dipen Shah, Head- Private Client Group Research, Kotak Securities in a note.
Also Read: IMD lowers monsoon forecast to deficient from below normal
"Over the medium term, markets will look out for Governments efforts on kick-starting stalled infrastructure
projects and new project awards. Passage of the Constitutional Amendment Bill for GST as well as further
progress on Land Acquisition Bill would also be key triggers for the markets over this period," he added.
Here are three reasons why the Sensex slipped over 600 points today despite the RBI cutting rates in
line with expectations:

RBI likely to be on prolonged pause: Markets seem to be taking a cue on future rate cuts from the tone of the

policy, which suggests that the RBI will prefer to wait for data on monsoon forecast and keep a check inflation
http://www.business-standard.com/article/printer-friendly-version?article_id=115060200605_1

1/2

02/06/2015

www.business-standard.com/article/printer-friendly-version?article_id=115060200605_1

before cutting rates further.

Ajay Bodke, head of investment strategy and advisory, Prabhudas Lilladher, for instance, believes that tough the
rate cut is on expected lines, the commentary on inflation is a bit hawkish, which is giving an impression to
investors that the RBI may remain on a prolonged pause as regards cutting rates further.

Concerns over monsoon: Analysts suggest that the road ahead for the markets will depend on the progress of

monsoons, which according to latest estimates, has been trimmed to 88% of the long-term average by the
government on Tuesday.
Also Read: Monsoon forecast downgraded to 88%, stokes fears of drought
According to Bodke, a lot will depend on monsoon and how it progresses over the next few months. A pick up
in monsoon, which in turn could keep inflation under check, will help in perking up market sentiment. He sees the
upside for the Nifty capped at 8,500 8,600 levels.

Lack of catalysts / positive triggers: With the RBI policy now over, analysts say that the focus now shifts to

global events such as interest rate decision by the US Federal Reserve, developments across the euro-zone,
especially Greece and how the oil prices pan out going ahead. Analysts say that there are no catalysts / positive
triggers for now that can take markets higher.
Also Read: European shares dip amid Greece uncertainity
Explains Andrew Holland, CEO, Ambit Investment Advisors: There is nothing much for the markets to be
excited about going ahead and I expect the markets to go down from here on. The markets are in a bit of a
twilight zone and there are no catalysts for any sector to move up. Well have to wait till the economy starts to
recover. Global factors like Greece, interest rate decision by the US Federal Reserve (US Fed) could also weigh
on the sentiment, he adds.

http://www.business-standard.com/article/printer-friendly-version?article_id=115060200605_1

2/2