Mumbai, Jun 8 (PTI) Equity benchmarks lurched lower for the fourth session on the trot on Wednesday after the RBI hiked the policy rate on expected lines but sharply raised the inflation forecast for the current fiscal amid geopolitical tensions and supply chain issues.
Continuous foreign fund outflows and surging crude oil prices also weighed on sentiment.
The 30-share BSE Sensex tumbled 214.85 points or 0.39 per cent to close at 54,892.49 in see-saw trade. The broader NSE Nifty declined 60.10 points or 0.37 per cent to finish at 16,356.25.
Bharti Airtel was the top laggard in the Sensex pack, slumping 3.31 per cent, followed by ITC, Reliance Industries, Asian Paints, Axis Bank, IndusInd Bank, ICICI Bank and Kotak Mahindra Bank.
In contrast, Tata Steel, SBI, Dr Reddy’s, Bajaj Finance, TCS, Titan and MAruti emerged as the major gainers, climbing up to 1.70 per cent.
The Reserve Bank of India on Wednesday raised the key interest rate by 50 basis points, the second increase in five weeks, to rein in inflation that it saw continuing to hurt consumers in the near term.
With inflation persistently hovering above the upper tolerance limit of 6 per cent, the RBI’s six-member rate-setting panel voted unanimously to raise the lending rate or the repurchase (repo) rate by 50 basis points to 4.90 per cent, Governor Shaktikanta Das said.
He also said the Ukraine-Russia war has led to globalisation of inflation and it is posing new challenges, as the central bank upped the inflation projection to 6.7 per cent for the current fiscal, from April’s forecast of 5.7 per cent.
“RBI’s projections of GDP growth rate of 7.2 per cent and inflation of 6.7 per cent for FY23 reflect a realistic monetary policy. The higher inflation projection indicates that the central bank recognises the seriousness of inflation and the 50 bps repo rate hike is a message that they are determined to anchor inflation expectations.
“The Governor’s remark that the economy remains resilient and recovery has gathered momentum, is bullish from the market perspective,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The increase follows a 40 bps rise in early May at an unscheduled meeting that kicked off the central bank’s tightening cycle.
Das further said the RBI will remain focused on the withdrawal of accommodation as system liquidity continues to be high, but added that this will be done in a way that growth will continue to get adequate support.
“Quite contrary to outcomes of the previous MPC meets, the rate hike and the subsequent steps announced this time have been fairly in line with the consensus estimates. While RBI’s stance has not changed to neutral, the subtle shift from the words ‘remaining accommodative’ to ‘withdrawal of accommodation’ is an important take-away.
“The MPC also increased its CPI estimates to 6.7 per cent from 5.7 per cent for FY23, which now appears to be a more realistic level. This contributes to enhanced creditability and confidence in RBI’s policy decisions,” said Yesha Shah, Head of Equity Research, Samco Securities.
In the broader market, the BSE smallcap gauge declined by 0.33 per cent and the midcap index dipped 0.15 per cent.
Among BSE sectoral indices, telecom fell by 1.62 per cent, followed by FMCG 0.95 per cent, energy 0.87 per cent, oil and gas 0.69 per cent and power 0.35 per cent. Healthcare, IT, auto, metal and realty registered gains.
World stocks were mixed ahead of monetary policy announcements by the European Central Bank on Thursday and the US Federal Reserve next week.
In Asia, markets in Shanghai, Tokyo and Hong Kong ended higher, while Seoul settled lower.
European markets were trading mostly lower during afternoon trade. Stock markets in the US had ended with gains on Tuesday.
Meanwhile, international oil benchmark Brent crude jumped 0.93 per cent to USD 121.69 per barrel.
The rupee appreciated by 3 paise to settle at 77.75 (provisional) against the US dollar.
Continuing their selling spree, foreign institutional investors offloaded shares worth a net Rs 2,293.98 crore on Tuesday, according to stock exchange data. PTI SUM ABM ABM
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