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| Edited By: |Source: PTI |Updated: Mar 17, 2018, 06:35 AM IST
Although in line with the market expectations, RBI's hike in key rates coupled with concerns over rising inflation and higher current account deficit (CAD) pulled down the BSE benchmark Sensex today by about 182 points to below the 19,000-mark, at 18,969.45.
RBI also revised upwards the inflation target to 7% by the end of the current fiscal in March, fanning fears of further hike in interest rates to tame inflation.
Interest-rate related stocks like banking, Realty and Auto stocks, besides FMCG, were the among the worst hit.
Initially, the market absorbed the hike in RBI's short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each, to 6.50% and 5.50%, in its third quarter review of monetary policy, which was in line with the market expectations.
However, concerns shown by the central bank Governor Duvvuri Subbarao over the spillover of food inflation to general inflation, rising global crude oil prices and high CAD of 3.5% of the GDP this fiscal, weighted down the market. Also, concerns over difference between bank deposits and the credit growth added to the selling sentiment.
The Bombay Stock Exchange 30-share bellwether index initially touched a high of 19,340.99, but fell back sharply on selling in the interest-rate related stocks to end at 18,969.45 -- a fall of 181.83 points or 0.95%. Yesterday, it ended up by 143.75 points or 0.76%.
Similarly, the 50-issue Nifty of the National Stock Exchange also dropped by 55.85 points or 0.97% to 5,687.40.
The Sensex fall was also on account of retail investors and funds squaring up their pending positions before the end of January settlement in the derivatives segment.
Meanwhile, in the policy review, the cash reserve ratio (which is the percentage of their deposits that banks must keep with the RBI as cash) and statutory liquidity ratio (SLR), however, have been left unchanged at 6% and 24%, respectively.
Experts said some investors were expecting a 50 basis point increase in key rates and in view of high inflation the RBI will have to continue raising them. There might be an overall hike in policy rates by 100 basis points (or 1%) during 2011, they added.
Meanwhile, some bankers said that there will not be immediate hike in home, auto and corporate loan rates.
On the global front, Asian indices ended narrowly mixed while European stocks too were trading side-ways in the afternoon deals.
From the banking segment, largest private sector banks, ICICI and HDFC tumbled by 4.21% and 2.85%, contributing nearly 90 points to the Sensex fall.
Fast Moving Consumer Giant, HUL, was the top loser from the Sensex pack with a sharp decline of 5.45%.
Other major losers were, RIL, 1.29%, M&M-2.25%, Tata Motors-1.91%, REL Infra-1.63%, Jindal Steel-1.56%, Jaipra Asso-1.51%, REL Com-1.37%, TCS-1.17%, Cipla-1.09% and Infosys Tech-0.74%.
From the sectoral indices, the Bankex tumbled by 2.34%, the BSE-FMCG 1.67%, the BSE-HC 1.25%, the BSE-Realty by 1.20% and the BSE-Auto by 1.05%. The BSE-CD however rose by 1.73%.
The total market breadth turned negative as 1,652 stocks ending with losses against 1,207 that finished with gains on the BSE. The total turnover shot up to Rs3,629.02 crore from Rs2,906.36 crore yesterday.
