Mumbai: Markets eased on Wednesday, with rate-sensitive sectors such as financials and automakers among the losers as investors braced for slower growth following hefty interest rate increases.
At 10:57am, the 30-share BSE index was down 0.1% at 18,499.29 points, extending the previous day’s 1.9% slide after the central bank raised rates by a higher-than-expected 50 basis points. More than half the index components dropped.
It was the 11th increase by the Reserve Bank of India since March 2010 and showed unexpected resolve in fighting persistently high inflation despite slowing growth in Asia’s third-largest economy and uncertainty about global demand.
“Investors will definitely be cautious. We don’t know when it (rate hike cycle) gets over,” said Vaibhav Sanghavi, director of Ambit Capital. “Inflation isn’t going to come down in a hurry. It is here to stay for now.”
Expectations for rate increases for the remainder of 2011 have jumped by 50 basis points after the harsh move, a Reuters snap poll found on Tuesday.
Foreign funds have invested a net of $2.8 billion in Indian equities since June 23, but the latest figures suggest dwindling interest.
Leading lenders State Bank of India , ICICI Bank and HDFC Bank shed between 0.1% and 1.1% as rising borrowing costs were expected to dampen loan demand.
Automakers, whose sales are mostly driven by consumer financing, were also in reverse gear. Tata Motors , Maruti Suzuki , Bajaj Auto and Mahindra & Mahindra dropped between 0.3% and 1.7%.
Cairn India bucked the trend and rose 0.6% after the oil explorer reported a nearly 10-fold jump in its fiscal first-quarter profit on higher output.
The 50-share NSE index was down 0.2% at 5,565.40 points.
Losers and gainers were almost evenly matched on the NSE with 167 million shares changing hands.
The MSCI’s measure of Asian markets other than Japan was up 0.4%, while Japan’s Nikkei slipped 0.5%.
SKS Microfinance , India’s largest and only listed microfinance company, fell as much as 10%, a day after the company posted a net loss for the June quarter and said its board had approved raising up to Rs 900 crore.
The stock later pared losses to 4.1% at Rs 501.
Hexaware Technologies was up 2.8% at Rs 81.85 after the software services firm said its April-June net profit rose more than four times from a year ago, and beat street estimates.