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Informist, Friday, Feb. 7, 2025

By Akash Mandal

MUMBAI – Benchmark indices ended lower Friday, declining for the third straight session. Indices failed to be cheered on by the 25-basis-point cut in key interest rates by the Reserve Bank of India, its first in five years. The rate cut was already priced in, analysts said, adding only a 50 basis point cut would have provided stimulus for the indices.

While the cut was factored in, the more interesting part of the policy statement was the RBI's seeming shift to a stance focusing equally on economic growth and curbing inflation, compared to earlier when the central bank was laser-focused on controlling inflation, analysts said.

Experts are mixed on the depth of the rate cuts that will follow. "The quantum and timing of further rate cuts will depend a lot on how the Fed (US Federal Reserve) moves forward, as even they are in a wait and watch mode because of President Trump's policies and how it might affect global inflation," Apurva Sheth, head of market perspectives and research, SAMCO Securities, said in a note. "Along with this, the RBI also has to support the ailing rupee, which is at an all-time low. Thus, the RBI has limited scope for rate cuts going forward," Sheth said. 

Others, however, expect a deeper rate-cut cycle. "While Governor (Sanjay) Malhotra suggested data dependence in his policy speech, we expect that this is the start to a deep rate cut cycle – we see another 75 bps of rate cuts in the pipeline this year," Aurodeep Nandi, India economist and executive director at Nomura, said. 

The Nifty 50 ended at 23559.95 points, down 43.40 points or 0.2%, and the BSE Sensex closed at 77860.19 points, down 197.97 points or 0.3%. Both indices had fallen as much as 0.7% during the session but recovered a bit more than half their losses. Broader market indices ended mixed, with the Nifty Midcap indices ending slightly higher, while the Nifty Smallcap indices declined.

Rate sensitive sectoral indices such as the Nifty Auto, Nifty Realty, and Nifty Private Bank ended slightly higher, while metal stocks were the biggest winners. Tata Steel gained over 4% and was the top performer on the Nifty 50. Jindal Steel & Power, JSW Steel, and Vedanta also ended 3-4% higher. 

On the other hand, public sector banks were the worst hit, with the State Bank of India falling 2%. During market hours Thursday, SBI had reported its December quarter earnings, which showed its net profit for the quarter beat analysts' estimates. However, its net interest income rose just 4% on year while the provisions for bad loans soared 31% on year. The stock had ended in the red on Thursday and is now down nearly 4% after the earnings. The Nifty PSU Bank fell over 1% with all constituents in the red. Bank of Maharashtra, Punjab & Sind Bank, and Bank of Baroda also declined 1-2%. 

While the outlook for the sector is still largely positive, some banks such as HDFC Bank, ICICI Bank, and Kotak Mahindra Bank may face increased margin pressure in the near term, a banking analyst at a leading domestic brokerage said. The sector could underperform the overall market in the near term, the analyst said. 

Among individual stocks, Bharti Airtel ended nearly 4% higher after its consolidated net profit for the December quarter surged almost four times sequentially. The surge in the net profit was helped by a one-time gain of INR 75.46 billion from Indus Towers. The company would have beat the Street's view even excluding the gain. 

Godfrey Phillips India surged nearly 19% and was the top performer on the Nifty 500. Bharti Hexacom and ZF Commercial Vehicle Control Systems India also ended 12% and 9% higher after positive earnings for the quarter. 

On the other hand, NCC India fell almost 13% and was the worst hit on the Nifty 500 after its net profit for the December quarter declined almost 13% on year to INR 1.85 billion. Sonata Software plunged 19% during the session after its net profit and margins for the quarter missed analysts' estimates. However, the stock recovered and closed 11% down. Bikaji Foods International also fell over 10% after its net profit for the quarter fell 39% on year. 

* Of the Nifty 50 stocks, 27 rose and 23 fell

* Of the Sensex stocks, 15 rose and 15 fell

* On the NSE, 1,042 stocks rose, 1,756 fell, and 97 were unchanged

* On the BSE, 1,520 stocks rose, 2,402 fell, and 142 were unchanged

* Nifty PSU Bank: down 1.4%; Nifty FMCG: down 1.3%; Nifty Metal: up 2.7%

BSE                                                      NSE

Sensex: 777860.19 points, down 197.97 points or 0.3%     23559.95 points, down 43.40 points or 0.2%

End

US$1 = INR 87.58

Edited by Saji George Titus

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