New Delhi: The sharp hike in policy rates has come as a negative surprise for the Indian stock markets. The Reserve Bank of India took a tough anti-inflationary stance and increased key policy rates by 50 basis points (Read more). This was more than the consensus 25 bps forecast by economists and is expected to increase borrowing costs for companies. That’s also more pressure on the profitability of local firms that are facing rising input costs and expenses.
Sensex: 18,534 –2.44%
Nifty: 5,565 –2.39%
Except for BHEL, all stocks in the Nifty-50 shares closed the day with losses. Shares of JP Associates plunged by more than 8%.
JP Associates: Rs 84 –8.65%
Punjab National Bank: Rs 1,095 –4.96%
State Bank of India: Rs 2,579 –4.22%
All sectoral indices closed with losses on the BSE. Automobiles, banking and real estate indices led the losses. Investors sold these interest rate sensitive stocks on concerns that high interest rates will dampen revenue growth and impact earnings of the companies. Banks too are expected to suffer because of the increase in savings bank rate to 4% and higher provisioning requirements.
BSE Auto: 9,108 –3.74%
BSE Bankex: 12,406 –3.11%
BSE Realty: 2,140 –2.91%
All stocks in the BSE Auto index closed with losses. Rising interest rates are expected to impact sales of leading automobile companies. This led to selling in automobile stocks.
Tata Motors: Rs 1,163 –5.30%
Bajaj Auto: Rs 1,366 –5.02%
Mahindra & Mahindra: Rs 707 –4.47%
Ashok Leyland: Rs 49 –4.08%
With Tuesday’s losses, Indian stocks have closed down consecutively for seven trading sessions. About 71.86% of the stocks traded on the BSE closed the day with losses.