Mumbai: Indian shares were trading 0.2% lower on Monday, weighed down by the central bank’s rate hike late on Friday, with financials leading the decline.
However, the stocks erased some of their early losses and were off lows as the rate hike itself was expected in the near term, although its timing came as a surprise.
The Reserve Bank of India raised its short-term borrowing and lending rates by 25 basis points each, citing intensifying inflationary pressures and a steady economic recovery.
“I don’t think the rate hike had a significant impact on the stock market. A rate hike up to 50 basis points in the near term was already factored in,” said Tarun Sisodia, head of research at Anand Rathi.
Top lender State Bank of India was down 1.1%, while leading private-sector lender ICICI Bank fell 1.8%.
Mortgage lender Housing Development Finance Corp was trading nearly 2% lower.
By 10:55am, the 30-share BSE Index was trading down 0.18% at 17,545.89, with half of its components declining. The 50-share NSE index was down 0.3% at 5,248.10.
The benchmark fell as much as 1.4% earlier in the session.
“The market fell in a knee-jerk reaction. But, the rate hike is more or less factored in,” said Deven Choksey, managing director and CEO of KR Choksey Shares, pointing that the shares had recovered from early lows.
Last week, the benchmark registered its sixth straight weekly gain, its longest streak of weekly gains since last June.
Meanwhile, plan panel deputy Montek Singh Ahluwalia said inflation was expected to come down in two months and the winter crop would likely be good.
Other rate sensitives such as auto and real estate stocks also dropped after the central bank move.
Top vehicle maker Tata Motors and top carmaker Maruti Suzuki shed 0.5% and 1% respectively, while top utility vehicle maker Mahindra and Mahindra was down 0.9%.
Top-listed real estate firm DLF declined 1.5%.
Bharti Airtel was up 2.3% after the top mobile operator said on Sunday it had tied up the entire funding for $8.3 billion for its planned buy of Zain’s African assets.
Bharti and Zain are in exclusive talks until 25 March, marking the third time the Indian firm has tried to get its hands on a meaningful African business after two failed bids for South Africa’s MTN.
In the broader market, losers led gainers in a ratio of 1.1:1 in a volume of 127 million shares.