Reserve Bank of India (RBI)’s move on monetary policy steered the trajectory of Indian market on Wednesday, with equities suffering for the second straight session. Benchmark indices closed the session with losses close to 1% following the central bank’s announcement to keep the repo rate unchanged at 6% and raising the inflation forecast.
Banking sector bled with medium-term rate cut hopes dashed, with RBI’s move to maintain status quo sparking a sell-off in banking stocks. Weak sentiment hovered over realty and automobile counters too.
The six-member Monetary Policy Committee (MPC), headed by RBI governor Urjit Patel raised inflation forecast for remainder of the current fiscal to 4.3-4.7%.
The 30-share Sensex dropped 205.26 points, or 0.63%, to close at 32597.18, after hitting a low of 32565.16 soon after the central bank announced its policy rate. The wider Nifty, on the other hand tanked 74.15 points, or 0.73%, ending at 10044.10. It had touched a high of 10104.20 in early trade.
Interest rate-sensitive stocks took a beating, dragging the BSE banking index down by 1.23%. State bank of India, ICICI Bank, Axis Bank, HDFC Bank, Bank of Baroda, Punjab National Bank and YES Bank fell up to 2.27%. “Given that interest rates are unlikely to reduce at least in the near to medium term, rate sensitive stocks slid due to rising oil price and concern over fiscal slippage,” said Vinod Nair, head of research, Geojit Financial Services.
In sync with overall trend, the rupee too weakened to quote at 64.55 against the dollar intra-day.
Sun Pharma emerged as the worst performer among Sensex constituents by falling 2.31%, while Bajaj Auto declined 1.65%. Other losers, apart from bank stocks, were ONGC, L&T, Tata Motors, M&M, Tata Steel, Bharti Airtel, ITC Ltd, NTPC, Dr Reddy’s, Hero MotoCorp, Asian Paint, Adani Ports, Cipla, Wipro, TCS and Lupin.
Sector-wise, the BSE metal index fell the most by 2.03%, followed by telecom 1.38%, PSU 1.32%, banks 1.23%, infrastructure 1.15%, capital goods 1.09%, healthcare 1.02%, power 0.91% and auto 0.73%.
The mid-cap index shed 0.89% and small-cap declined 0.66%.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 1,470.56 crore, while domestic institutional investors (DIIs) bought to the tune of Rs 1,074.39 crore yesterday, as per data.
Other Asian markets closed lower. Japan’s Nikkei fell 1.97%, Hong Kong’s Hang Seng shed 1.63% while China’s Shanghai Index was down 0.29%, extending a retreat across Europe and New York. Frankfurt’s DAX 30 fell 0.08% while Paris CAC 40 shed 0.26% in their early deals. London’s FTSE too fell 0.16%.