Sensex ends below 19000; banks tumble ahead of RBI meet

Indian equity benchmarks closed  at a one-month low in the first trading session of May. Rate sensitives like financial and auto stocks took huge beating ahead of RBI's policy meet on May 3. Commodity related sectors like oil & gas and metal too added pressure on the markets.

The 50-share NSE Nifty touched the 5700 mark in an intra-day trade, before closing at 5,701.30, down 48.2 points or 0.84%. The 30-share BSE Sensex too ended below the 19,000 mark - an important psychological level, before ending at 18,998.02, down 137.94 points or 0.72%.

All eyes are on policy meet - the major trigger - which will be announced on May 3. Experts believe that India's central bank Reserve Bank of India is going to increase key rates in range of 25-50 basis points. It seemed that market almost factored in that much hikes. Benchmarks have been fallen for fifth consecutive session today. But more than 50 bps hike will trigger more sell-off, say experts.

Anand Tandon, CEO of JRG Securities said unless the RBI surprises by hiking rates by more than 50 basis points, there won't be any negative reaction from the market.

''We still have a strange situation where inflation is higher than the long-term interest rates of government bonds. So, the bond market seems to be fairly sanguine and the equity market right now is not necessarily responding to these skews. If the rate hike hits 50 bps, then the market will remain where it is,'' Tandon said.

Nandan Chakraborty of Enam said the RBI might raise policy rates by upto 50 bps tomorrow. "We also expect the RBI to forecast 8% GDP growth and a 5.5-6% WPI inflation target for FY12. However, a less than 50 bps rate hike due to growth considerations could lead to a reprieve for the rate sensitives in the immediate term."