The Hindu Business Line : Market tanks on rate hike blow

Mumbai, July 29 The RBI’s higher-than-expected repo rate and CRR hikes came as a total surprise to investors, triggering a 500-plus point fall in the Sensex on Tuesday.

The benchmark indices Sensex and Nifty fell sharply after the RBI measures became public, albeit earlier (11.45 a.m.) than they should have (12 noon).

The Sensex settled 557 points lower at 13,791, while the Nifty closed 142 points lower at 4,189.85.

“The magnitude of the hike has surprised the market. The sharp rate hikes over the last two quarters might slow down the growth momentum,” said Mr Sujoy Kumar Das, Head of Fixed Income of Bharti Axa Investment Managers.

The hike led to a sharp fall in the interest rate-sensitive stocks. The share prices of banking, realty, auto and capital goods companies were hit the hardest.

FIIs and the domestic institutional investors were both net sellers of equities, for Rs 538 crore and Rs 254 crore respectively.

“With capital becoming dearer, we expect the impact of this to be visible not only on the rate-sensitive sectors but also on corporate profitability as a whole as most sectors and companies have embarked on huge capacity expansion plans,” said an analyst.

The BSE Bankex fell the most, dropping 8.31 per cent. SBI fell 6.84 per cent, ICICI 8.45 per cent, HDFC 8.71 per cent and Punjab National Bank 8.05 per cent.

Some of the mid-rung banks sank even more: Bank of India was down 12.57 per cent, Axis Bank 11.06 per cent, Kotak Mahindra Bank 9.81 per cent, and Indian Overseas Bank 9.52 per cent.

The BSE Realty index fell 5.54 per cent, while realty major DLF lost 5.52 per cent and Unitech 6.50 per cent.