Markets end with modest loss amid extreme volatility

21 April 2009

The benchmark indices ended the day on a negative note. The markets were volatile almost throughout the session. The sell-off was seen in shares of major banking, capital goods, technology, metal, auto and select power companies. However, telecom, FMCG sectors and stocks like DLF, HDFC Bank, Sun Pharma, SAIL, Hindalco, Tata Power and Grasim witnessed buying interest. Reliance Industries, ONGC and NTPC played a key role in today's volatility.

The announcement of credit policy by Reserve Bank of India, RBI was a non-event for the markets, despite cutting repo and reverse repo rates by 25 bps each while cash reserve ratio, CRR remained unchanged. The central bank lowered FY10 GDP growth forecast to 6% and projected credit growth at 20%. The RBI said inflation risks have "clearly abated" and it sees WPI inflation negative for short period.

Nilesh Shah, Deputy MD, ICICI Prudential said, "From an overall long-term point of view, this credit policy has committed to lower interest rates providing adequate liquidity and this has set a definite target in deposit growth and credit growth.''

The 30-share BSE Sensex closed 81.39 points or 0.74% lower at 10,898.11, after hitting an intraday high of 11,068.82 and low of 10,764.08. The 50-share NSE Nifty was down 0.35% or 11.80 points, to settle at 3,365.30; it touched a high/low of 3,414.70 and 3,309.35, respectively.

Hitesh Agarwal, Head of Research, Angel Broking, is anticipating some kind of cool off in the market in the immediate short-term. "There could probably be a 1,000-point correction on the Sensex."

However, he was quick to add that the medium-term prospects of the market are much better. "It is not bad if the Sensex goes back to below 10,000 or 9,500 as people investors who missed out on this rally would get back into the market.