Sensex drops over 200 points as RBI cuts GDP forecast; bank stocks tank

Mumbai: Equity benchmark BSE Sensex dropped over 200 points in afternoon session on Friday, after the RBI sharply cut the country's economic growth projection for this fiscal to 6.1 per cent from 6.9 per cent.

In the fourth bi-monthly review of the policy, the central bank also reduced its benchmark lending rate by 0.25 per cent to revive growth that has hit six-year low of 5 per cent.

After opening nearly 300 points higher, the 30-share index pared all gains to turn negative after the policy announcement by the Reserve Bank of India (RBI). It was trading 240.66 points, or 0.63 per cent, lower at 37,866.21 at 1300 hours. Similarly, the broader NSE Nifty stood 71.85 points, or 0.64 per cent, down at 11,242.15.

Top losers in the Sensex pack included Kotak Bank, Bharti Airtel, L&T, PowerGrid, ITC, HDFC Bank, Tata Motors, ICICI Bank, Axis Bank and HUL, shedding up to 3 per cent.

On the other hand, IndusInd Bank, M&M, Tech Mahindra, Infosys, HDFC, Sun Pharma, Hero MotoCorp and Vedanta rose up to 2 per cent.

Rate-sensitive banking stocks faced the heat, with the BSE bankex falling 1.16 per cent. BSE realty and consumer durables indices too turned red.

The Reserve Bank on Friday sharply cut its economic growth projection for this fiscal to 6.1 per cent from 6.9 per cent earlier, but expressed hope that the growth will recover in the second half of 2019-20.

The central bank's estimates come in the wake of GDP growth sliding to a six-year low of 5 per cent in the June quarter, on a massive slowdown in consumption and private sector investments.

Further, the RBI's Monetary Policy Committee cut its benchmark lending rate by 0.25 per cent to revive growth that has hit six-year low of 5 per cent, and affirmed commitment to remain accommodative to address growth concerns 'as long as necessary'.

The rupee was also trading flat against its previous close at 70.89 in afternoon session.

Elsewhere in Asia, bourses in Hong Kong, Korea and Japan were trading on a weak note.

Chinese markets are closed for the holiday week.

Brent futures, the global oil benchmark, rose 0.42 per cent to USD 57.95 per barrel.