Stocks plunge despite RBI rate cut, financials under pressure

Mumbai: Equity benchmark indices were dragged down by financial stocks in afternoon trade on Thursday even though the Reserve Bank of India (RBI) reduced repo rate by 25 basis points to 5.75 percent in its second bi-monthly monetary policy meet of fiscal 2019-20.

The BSE S&P Sensex closed 554 points down at 39,529 while the Nifty 50 lost points to 11,844.

At the National Stock Exchange, all sectoral indices were in the red. Nifty PSU bank fell 4.9 percent, private bank 2.3 percent and financial service 2.3 percent.

Shares of Eros International Media tumbled nearly 20 percent after CARE rating agency cut its creditworthiness citing delays or likely defaults in serving debt availed from banks.

Stocks of home loan lender Dewan Housing Finance Corporation Ltd also fell as much as 15.86 percent after rating agencies ICRA and Crisil slashed their outlook on the company’s commercial paper program.

Government-owned energy major GAIL slipped 11.5 percent while Indiabulls Housing Finance was down 7.7 percent.

IndusInd Bank closed 6.8 percent lower, Yes Bank down 5.8 percent, State Bank of India down 4.5 percent and ICICI Bank down 1.7 percent.

However, marginal gains were witnessed in Coal India, Hero MotorCorp, NTPC and Power Grid Corporation.

Many investors said the RBI’s move to cut interest rates marginally is unlikely to stimulate demand in the near-term due to the absence of quick resonance in the financial market. While banks are struggling with high non-performing assets, non-banking finance companies are struggling with solvency issues leading to a credit freeze, they said.

Meanwhile, Asian shares were mixed as investors feared a looming US trade war with Mexico which could further depress global growth. Japanese and Chinese shares dipped while they were flat in Hong Kong, a day after US stocks closed higher.

On late Wednesday, sentiment soured after a meeting between US and Mexican officials ended with scant sign of progress.

[source_without_link]ANI[/source_without_link]