Now all eyes are on Monetary Policy Committee's rate decision scheduled to be announced on Wednesday. Largely expectations are status quo on policy rates but the commentary would be keenly watched, experts said.
The market started off the week on a strong note following positive global cues post better-than-expected US jobs report, but wiped out all its gains within few minutes from opening with the Sensex falling more than 200 points on Monday.
The correction in banking & financials pulled benchmark indices down as investors turned cautious ahead of Monetary Policy Committee's three-day meeting that began today.
The 30-share BSE Sensex fell 215.37 points or 0.61 percent to 35,011.89 and the 50-share NSE Nifty shed 67.70 points or 0.63 percent to 10,628.50 despite the rally in global stocks.
Now all eyes are on Monetary Policy Committee's rate decision scheduled to be announced on Wednesday. Largely expectations are status quo on policy rates but the commentary would be keenly watched, experts said.
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"Overall, neither domestic nor global developments warrant monetary tightening at this stage. In case the government announces a double-digit hike in MSPs (likely to be announced in the next two weeks), the RBI can hike policy rates in August 2018," Motilal Oswal said.
It further said nevertheless, if the RBI changes monetary policy stance this week and the MSP hike remains in single-digit, the RBI’s credibility will take a serious hit.
India Ratings also believes the Reserve Bank of India’s Monetary Policy Committee (MPC) will keep the policy rate unchanged in its upcoming review.
"Although the MPC minutes from April’s policy review indicate a potential shift in the Reserve Bank of India’s liquidity stance to ‘withdrawal of accommodation’ from current ‘neutral’ stance, the agency believes the MPC will wait for the outturn of monsoon and its distribution, and further movement in crude oil prices before deciding on the rate hike," it said.
On the global front, European markets traded higher amid a slew of corporate news about potential mergers and acquisitions. France's CAC, Germany's DAX and Britain's FTSE gained 0.3-0.75 percent at the time of writing this article.
Asian markets rallied following positive lead from Wall Street after better-than-expected US jobs report. Hong Kong's Hang Seng and Japan's Nikkei climbed over a percent while China's Shanghai Composite and Australia's ASX 200 rose over half a percent.
Oil prices declined amid strong US production and likely increase in output from OPEC members. Brent crude futures fell 1.13 percent to $75.92 a barrel.
Back home, the broader markets continued to underperform frontliners as the Nifty Midcap index shed over a percent. The market breadth was largely in favour of bears as more than four shares declined for every share rising on the NSE.
Nifty Bank index plunged 435 points and Nifty Financial Services index also declined 1.6 percent while Realty fell more than 3 percent.
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HDFC Bank is the lead contributor to market's fall, shedding 3 percent on profit booking. Indiabulls Housing, was the biggest loser among Nifty50 stocks, down nearly 5 percent.
Bajaj Finserv, HUL, Adani Ports, L&T, SBI, Bharti Airtel, Kotak Mahindra Bank, Eicher Motors and Titan Company among others were down 1-3 percent.
However, index heavyweights Reliance Industries (up 1.11 percent) and Infosys (up 1.5 percent) managed to minimise losses. IOC, TCS, M&M, Tata Steel and Hindalco Industries gained up to 1.4 percent.
Dr Reddy's Laboratories rallied 2.8 percent after the audit of API Srikakulam Plant (SEZ), Andhra Pradesh by the US Food and Drug Administration completed with no observations.
Lemon Tree Hotels jumped 4.4 percent after global brokerage firm CLSA initiated coverage with Buy rating on the stock with a target price of Rs 90 per share as it expects 60 percent EBITDA CAGR and return on capital employed to expand by 684 bps over FY18-20.
SAIL rose over 4 percent after Citi upgraded the stock to Neutral from Sell and upped target price to Rs 83 from Rs 50 per share as it expects steel spreads to sustain on better demand, supply limits and falling inventories, and expects strong volumes and fall in net debt-to-EBITDA to three times by 2019-20.
Meanwhile, the rupee wiped out all its gains in morning trade itself, closing down 5 paise at 67.11 against the US dollar. It appreciated up to 66.85 intraday following positive trend in equities.