Markets Retreat a Day after Reaching Lifetime Highs

Equity benchmarks dipped on Friday, weighed down by banking, energy and FMCG stocks, after the RBI left interest rates unchanged but slashed the GDP growth estimate for this fiscal following the second wave of Covid-19.

Weak global cues and a struggling rupee also soured risk appetite, traders said.

The 30-share BSE Sensex ended 132.38 points or 0.25 per cent lower at 52,100.05, merely a day after closing at its lifetime peak.

Similarly, the broader NSE Nifty slipped 20.10 points or 0.13 per cent to finish at 15,670.25.

The top laggard in the Sensex pack was Nestle India, declining 1.97 per cent. This was followed by SBI, HDFC Bank, ICICI Bank, Axis Bank, Titan, HUL and Reliance Industries.

On the other hand, Bajaj Finserv, ONGC, L&T, Bajaj Finance and HDFC were among the gainers, climbing up to 2.53 per cent.

The Reserve Bank of India (RBI) on Friday left the key interest rates unchanged at record lows as it reiterated its commitment to keep its monetary policy accommodative to help the economy recover from the world's worst outbreak of Covid-19 infections.

It also lowered its forecast for the country's economic growth to 9.5 per cent for the current financial year ending March 31, 2022, from the previous estimate of 10.5 per cent, and projected the retail inflation at 5.1 per cent for this fiscal, within its target range of 4 per cent with a margin of 2 per cent on either side. 

Besides, the central bank expanded its version of quantitative easing to keep borrowing costs anchored. It will buy an additional Rs 1.2 lakh crore of bonds under the Government Securities Acquisition Programme (G-SAP) 2.0 in the second quarter.

"A moderate increase in inflation forecast by the RBI in its policy meeting outcome led G-sec yields increasing by 3 bps, which resulted in profit-booking in banks," said Binod Modi, Head - Strategy at Reliance Securities.

The Monetary Policy Committee (MPC) meeting outcome was mostly in-line with expectations as the RBI, in addition to maintaining status quo about policy rates, focused upon ensuring sufficient liquidity in the system and supported MSMEs and corporates hit in the second wave, he added.

"An improved prospect of economic recovery led by sharp drop in daily caseload, ramping up vaccination process and gradual withdrawal of restrictions imposed by states has already led markets to witness fresh high in this week," he said.

Sectorally, BSE bankex, FMCG, energy and healthcare indices fell up to 0.95 per cent, while industrials, oil and gas, capital goods and metal ended with gains.

Broader BSE midcap and small-cap gauges outperformed the benchmark, rising up to 0.7 per cent.

Meanwhile, India reported 1,32,364 fresh Covid-19 cases on Friday, taking the country's infection tally to 2,84,41,986.

The rupee fell 8 paise to close at 72.99 against the US dollar. 

World equities stayed on the backfoot, in line with Wall Street, as investors fretted over higher inflation and its impact on the Federal Reserve's accommodative stance.

Bourses in Hong Kong, Tokyo and Seoul closed in the red, while Shanghai ended with gains.

Equities in Europe were trading on a negative note in mid-session deals.