Reserve Bank says GDP to contract; markets slip into red

Banking, financials bear brunt; FPIs net sell ₹1,354-cr. shares

Equity indices dipped into the red on Friday after the Reserve Bank of India (RBI) Governor Shaktikanta Das said that GDP growth in the current financial year is expected to be in negative territory.


The benchmark Sensex closed at 30,672.59, down 260.31 points or 0.84%. During the day, it was down almost 460 points to touch a low of 30,475. Prior to the RBI statement, the benchmark had touched an intraday high of 31,107.91, gaining about 175 points from the previous day’s close.

The broader Nifty settled the day at 9,039.25, down 67 points or 0.74%. The losses were primarily led by banking and financial stocks as Sensex constituents such as HDFC, HDFC Bank, ICICI Bank, Axis Bank and Bajaj Finance, along with Reliance Industries contributed the maximum to the day’s fall.

“The extension of moratorium would be negative for lenders, even though, to some extent, the rate cut will be helpful for credit growth and also bring down the costs for banks and NBFCs,” said Lalitabh Shrivastawa, deputy vice-president, research, Sharekhan.

Weakness, a key concern

He added that currently, weakness in the growth outlook has been the key concern of the Monetary Policy Committee. Incidentally, the BSE Bankex and BSE Finance were the top losers among the sectoral indices, shedding 2.44% and 3%, respectively.

Overall, more than 1,350 stocks ended in the red against 932 that declined.

Foreign portfolio investors (FPIs) were net sellers at ₹1,354 crore with their domestic counterparts selling shares worth ₹344 crore.

Incidentally, the central bank has extended the Voluntary Retention Route (VRR) for FPIs by another three months on account of issues expressed by overseas investors and their custodians due to the ongoing coronavirus pandemic.

Under the VRR, which is a way to attract long-term and stable FPI investments in debt markets, 75% of the allotted limit has to be invested within three months.

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Printable version | Jun 2, 2020 9:28:59 PM |

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