Stock markets fell to near two-week lows on Wednesday as bank stocks declined on concerns that the Reserve Bank of India’s (RBI) decision to keep key policy rates steady while boosting banks’ liquidity in a bid to persuade them to lower lending rates would weigh on profit.
The benchmark Bombay Stock Exchange (BSE) index Sensex eased 0.14 per cent, while the broader 50-share National Stock Exchange (NSE) index Nifty fell 0.15 per cent, after earlier marking their lowest intra-day level since January 21.
The RBI held repo rate, the interest rate at which it lends to banks, steady at 7.75 per cent on Tuesday after easing monetary policy just three weeks ago, leaving its next move probably until after the government presents its Union Budget, due to be presented on February 28.
Bank stocks led the declines with the NSE’s bank index down 0.6 per cent.
Shares of Axis Bank fell 1.2 per cent, while State Bank of India’s stock lost 1.5 per cent, and ICICI Bank’s scrip was down 0.9 per cent.
Rising bad loans at ICICI Bank, Punjab National Bank and Bank of Baroda also led to paring of positions in the sector.
The country’s GDP and consumer price inflation data due next week are also seen as key for the central bank’s decision on interest rates post the Budget.
“If inflation trajectory remains benign and the government sticks to its fiscal deficit targets, there is a strong chance of further rate cuts by RBI,” said Nirakar Pradhan, chief investment officer at Future Generali India Life Insurance.
Stocks of oil explorers rose after crude oil price jumped 19 per cent over the past four sessions on hopes that prices of the fuel may have hit a bottom after a seven-month rout slashed oil futures by nearly 60 per cent and prompted major energy firms to cut spending on new production.
Cairn India shares rose 4.9 per cent while stocks of Reliance Industries gained 0.3 per cent.
Shares of state-run oil explorers also rose after news channel CNBC TV18 report that the oil ministry has proposed a new subsidy-sharing proposal with the Finance Minister.
The Oil and Natural Gas Corp (ONGC) scrip gained 2.2 per cent, while Oil India stocks rose 1.7 per cent.