Nasty shock for stocks

Mumbai, July 26: A steeper-than-expected rate hike by the Reserve Bank of India (RBI) on Tuesday sent the Indian markets into a tailspin. The 30-share Bombay Stock Exchange ended 353 points, or 1.87 per cent, lower at 18518.22 points and about 450 points down from its early gains during the day.

The broader Nifty also plunged 1.86 per cent, or 105.45 points, lower to close at 5574.85 points. The Indian stock markets that were anticipating a 25 basis points hike in the repo and reverse repo rates were taken by surprise when the central bank upped the two key rates by 50 basis points to 8 and 7 per cent, respectively.

Interest-sensitive sectors such as banks, auto and realty were worst hit on Tuesday after the RBI announced its first quarterly review for this financial year.

Commenting on the markets’ movements, Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services, said, “The markets may remain range bound from now on. We are at the upper end of the range. Hence, the rate hike may nudge the market downward to the lower band of the range. It could stay well within the range for some more time.”

Domestic brokerage Sharekhan’s head of research Gaurav Dua added the impact in sentiment by the rate hike could potentially lead to a downgrade in earning estimates of rate sensitive sectors such as automobiles and banks.

The realty index on the BSE was the worst hit and registered a 3.55 per cent decline, followed by capital goods with a fall of 3.49 per cent. The Bankex dipped 2.46 per cent and the auto index was down 2.14 per cent.

The big losers among the heavyweights were engineering company Larsen & Toubro, which fell nearly 4 per cent to Rs 1,781 and ICICI Bank, which was down 3 per cent to Rs 1,040. Mahindra & Mahindra slid over 4 per cent to Rs 716.

Reliance Industries, which had reported a 16.7 per cent rise in first quarter net profit on Monday, dipped 1.25 per cent to Rs 871.

On Tuesday, the prices of 1,000 stocks advanced and 1,887 declined out of a total of 3,004 scrips traded on the BSE.

Selloff was so strong that all sectoral indices closed with losses of between 3.55 per cent and 0.10 per cent and 29 out of 30 sensex-based scrips finished in the red, while only TCS ended in the green.

Globally, although Asian markets ended in the green, European stocks displayed a feeble trend, impacting the market sentiment negatively.