Monday, December 23, 2024 | 09:57 PM ISTEN Hindi

Sensex tanks 1,307pts on RBI's sudden 40bps rate hike; Nifty breaks 16,700

Meanwhile, the mega LIC IPO was off to a steady start, with policyholder and employee segment receiving strong response on Day 1 of the offer period.

SI Reporter New Delhi

Bear market, markets, bse, nse, sensex, nifty

The markets tanked heavily trades on Wednesday after RBI announced a surprise repo rate hike in an unscheduled meeting. The markets, were, already on tenterhooks awaiting the US Federal Reserve meeting outcome later tonight, wherein a 50 bps rate hike is anticipated.

In an unscheduled address, RBI Governor Shaktikanta Das announced that the monetary policy committee has unanimously voted to increase the repo rate by 40 bps to 4.40 per cent, adding that the central bank's stance remains accommodative. RBI also raised the CRR limit by 50 bps to 4.5 per cent with effect from May 21, which in turn will lead to withdrawal of Rs 87,000 crore the system, the governor added. READ MORE

RBI's sruprise move sent rate sensitive shares into a tailspin dragging down the key benchmark indices. The BSE Sensex tumbled to a low of 55,502, and eventually ended 1,307 points lower at 55,669. The NSE Nifty plunged 391 points to 16,678.

Rate sensitive shares - from sectors such as banking, NBFCs, housing finance, auto, real estate logged heavy losses in trade. READ MORE

Among the Sensex 30 stocks, Titan, Bajaj Finserv and Bajaj Finance plunged over 4 per cent each. IndusInd Bank, HDFC Bank, Reliance Industries, Asian Paints and Maruti were the other major losers, down over 3 per cent each. PowerGrid Corporation and NTPC, however, ended with gains.

Sectorally, the BSE Consumer Durables index tanked nearly 4 per cent amid supply concerns following a lockdown in China. The Finance, Healthcare, Telecom, Auto, Bankex, Capital Goods, Metal and Realty indices were also down 2-3 per cent each.

"The MPC's decision, in an unscheduled meeting, to raise the repo rate by 40bp and CRR by 50 bp is a surprise since it came on the LIC IPO opening date. MPC's proactive move is justified from the perspective of inflation management, but the timing leaves a lot to be desired. The above 1000 point crash in Sensex has soured the sentiments on the opening day of India's largest IPO. The 10-year bond yield has spiked to above 7.39% indicating an imminent rise in the cost of funds", said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Also read: Quantum, timing of RBI rate hike has surprised the markets: Analysts

LIC IPO day 1-subscription

Meanwhile, the mega-IPO of Life Insurance Corporation of India opened for subscription today. As of 03:30 PM, the issue was subscribed 50 per cent, with the policyholder and employee categories seeing highest subscription at 1.68 times and 89 per cent, respectively. The retail quota had received bids for up to 52 per cent of the limit.

Moreover, the offer period between May 4 and May 9 will be open for bidding on Saturday, May 7, as well.

4:23 PM

LIC IPO: 61% of issue booked so far

Policyholders: 1.79 times
Employee: 98 per cent
Retail investors: 54 per cent
NIIs: 25 per cent
QIBs: 33 per cent

Most large global investors may give LIC's initial public offering a miss

4:17 PM

Technical view: Kunal Shah - Senior Technical & Derivative Analyst at LKP Securities

The Bank Nifty index witnessed sharp selling pressure on the back of the RBI governor's announcement of a rate hike. The index formed a bearish engulfing candle on the daily chart and remains in a sell mode as long as it stays below the level of 36200. The index is likely to test the lower end levels of 35000-34800 and a sustainable move below this will accelerate the selling pressure.

4:15 PM

Market view: Vinod Nair, Head Of Research at Geojit Financial Services

Although the rate hike was anticipated, the sudden announcement of a 40bps increase in repo rate along with a 50bps increase in CRR in response to the rising inflation spooked markets leading to a heavy selloff. Global markets are also trading cautiously ahead of the upcoming Fed meeting, as an increase of more than 50 bps will extend the current consolidation phase.

4:10 PM

European markets edge lower in trade

4:05 PM

US equity futures trade on a positive note ahead of FOMC outcome

4:02 PM

ANALYST VIEW: Shivam Bajaj, Founder & CEO at Avener Capital

The hike in the repo rate has been announced to mitigate the results of spiking inflation rates in the economy. As the RBI announces withdrawal of its accommodative stance, this move might hint at the RBIs willingness to further tighten the liquidity in the forthcoming time. The long term impact of this rate hike across markets shall be an interesting sight.

3:59 PM