Mumbai: India’s benchmark indices on Thursday dropped over 1%, tracking fall in global markets, and ahead of the outcome of key assembly elections. At 11.12am, the BSE Sensex was trading at 35,504.22, down 380.19 points, or 1.06%, while the Nifty 50 stood at 10,649.25, falling 133.65 points, or by 1.24%. Exit poll for key states will be announced on Friday after 5.30pm and actual state results will be out on 11 December. Analysts point to a tight race in two and a potential loss for the ruling party in one.
“Proximity to general elections (April/May 2019) increases the market relevance of the state elections. Results will be taken as a reflection of the underlying mood, especially on reform-led disruption and regional hot-button issues like rural policies and concern over farm distress”, said Radhika Rao economist of DBS Bank in a 26 November note.
Global markets fell after the arrest of the chief financial officer of China tech giant Huawei Technologies Co. reignited concerns about U.S.-China tensions. Investors were cautious ahead of a closely watched meeting by the Organization of the Petroleum Exporting Countries (OPEC).
On Wednesday, the Reserve Bank of India has kept its interest rates unchanged for second straight meeting and lowered its inflation projection sharply to 2.7-3.2% from 3.9-4.5% for the second half of 2018-19, taking into account the fall in food inflation, crude prices and appreciating rupee. It expects inflation to rise to 3.8-4.2% in the first half of 2019-20.
Investors were also disappointed after RBI dashed hopes of any special liquidity window for non banking finance companies -- a key government demand to keep adequate liquidity in the system but signaled more bonds purchases via open market operations till end of March.
“We have been anticipating some relaxation in terms of liquidity measures to improve the flow of funds, as was announced in the previous RBI policy, however it has not come through. The need of the hour is to facilitate the flow of funds to the NBFCs and HFCs so that the informal segment of customers and the MSME sector get the much needed funds”, said Sanjay Chamria, VC & MD, Magma Fincorp.