Sensex dives 205 points on RBI status quo, inflation outlook
Mumbai: Equities suffered for the second straight session on Wednesday after the Reserve Bank of India (RBI) kept interest rates on hold, but raised the inflation forecast, dashing medium-term rate cut hopes and sparking a sell-off in banking stocks.
The six-member monetary policy committee, headed by governor Urjit Patel, kept the policy rate unchanged at 6% on expected lines but raised the inflation forecast for the remainder of the fiscal to 4.3-4.7%. The central bank kept the economic growth forecast unchanged at 6.7% for the fiscal ending 31 March.
The 30-share index declined by 205.26 points, or 0.63%, to 32,597.18 after hitting a low of 32,565.16 soon after the central bank announced its policy decision. The wider Nifty hit a low of 10,033.35 before finishing at 10,044.10, down 74.15 points, or 0.73%. It had touched a high of 10,104.20 in early trade.
Interest rate-sensitive stocks took a beating, dragging the BSE banking index down by 1.23%. SBI, ICICI Bank, Axis Bank, HDFC Bank, Bank of Baroda, Punjab National Bank and Yes Bank fell by 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 US 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 sold shares worth a net Rs1,470.56 crore, while domestic institutional investors bought to the tune of Rs1,074.39 crore on Tuesday, as per provisional data released by the stock exchanges.
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%.