Sensex, Nifty50 end lower as caution looms ahead of RBI’s rate hike decision

• The Sensex ended 208 points lower at 62,626 while the 50-stock Nifty50 closed 58 points down at 18,642.
• The IT index was the biggest drag with a decline of 1.45%, while the pharma and metal indices declined 0.75% each.
• Investors have been cautious ahead of RBI’s monetary policy outcome scheduled for tomorrow on December 7.
• Both FIIs and DIIs were net sellers on Tuesday – while FIIs withdrew ₹635 crore, DIIs sold equities worth ₹559 crore.

Indian benchmark indices Sensex and Nifty50 closed lower on Tuesday as caution loomed ahead of the crucial Reserve Bank of India decision on interest rate hikes due Wednesday. Global market cues were also largely negative as better-than-expected services data triggered worries of higher US Fed rate hikes.

The 30-scrip Sensex ended 208 points lower at 62,626 while the 50-stock Nifty50 closed 58 points down at 18,642. The IT index was the biggest loser with a decline of 1.45%, while pharma and metal indices declined 0.75% each. However, the PSU banks index continued on its upward path with gains of 1.26%.

“Weak sentiment prevailed through the session as investors offloaded shares in rate-sensitives such as banking, automobile and realty stocks on the eve of RBI's credit policy announcement,” said Shrikant Chouhan, head of equity research (retail), Kotak Securities.

The broader Nifty Banks index declined 0.45%, Auto index fell 0.26% while the Realty index ended the day 0.68% in the red.

The Reserve Bank of India’s Monetary Policy Committee meeting that began on Monday is set to conclude on December 7, when a decision on interest rate hike and the future direction of rate hikes is expected.

“In the past we have seen investors turning cautious ahead of a key event and booking some profit to avoid getting caught off guard. If the rate hike is above the street expectations, investors may press the panic button, which could accelerate the selling pressure,” Chouhan added.

Also adding to the pressure, the BSE Midcap and Smallcap indices ended in the red – BSE Midcap ended 0.53% lower while BSE Smallcap closed 0.32% down.

Losses of between 0.88-1.64% in heavyweight IT companies – Infosys, TCS, Tech Mahindra and HCL Technologies – also pressured the markets.

“IT stocks came under selling pressure following overnight weakness on Nasdaq and fears of continued rate hikes despite the fact that India Rupee fell about a percent on Dec 06. Global markets struggled for direction Tuesday as traders weighed prospects for a slowdown in the pace of US rate hikes against data that shows tighter policy may be needed for longer,” said Deepak Jasani, head of retail research at HDFC Securities.

In the US, the tech-heavy Nasdaq Composite declined 1.93% while the S&P 500 closed 1.79% in the red on expectations of the US Fed announcing higher rate hikes due to better-than-expected services data print.

Asian markets gave mixed cues as Hong Kong’s Hang Seng fell 0.40% while Nikkei 225 gained 0.24% and China’s Shanghai SE Composite was marginally higher at 0.02%.

On the BSE, 1,899 stocks declined while 1,596 stocks ended with positive gains on Tuesday.

Brent crude oil prices continued to fall, hovering around $81.5 per barrel, compared to $83.3 in the morning today.

Rupee closes at a month’s low
After showing strength during the previous week, the Rupee closed 82 paise lower against the US dollar, breaching the 82 mark. The Rupee ended the day at 82.61, the lowest level since November 3.

Analysts say an intervention by the Reserve Bank of India could be on the cards.

“Indian Rupee has become one of the weakest currencies across a broad basket of currencies on a year-to-date basis. However, over the near term, we expect central bank intervention to emerge at higher levels,” said Anindya Banerjee, VP - currency derivatives & interest rate derivatives at Kotak Securities.

Foreign institutional investors (FII) and domestic institutional investors (DII) were both net sellers on Tuesday – while FIIs withdrew ₹635 crore, DIIs sold equities worth ₹559 crore.

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