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Market recovered from their day's low after RBI governor Raghuram Rajan said that it will be wrong to say that RBI is prioritizing inflation over growth. Benchmark indices plunged after the central bank gave 25bps repo rate hike shocker to market. BSE Sensex plunged 596 points to 20051 while Nifty slumped 183points to 5933 after the announcement.
By 1:03AM, the 30-share BSE Sensex was lower by 387 points at 20,259 while the 50-share NSE Nifty declined 116 points to 5,998. Broader market too plunged with both small-cap and mid-cap indices down between 0.8%-1.3% on the BSE.
The repo rate is increased from 7.25 per cent to 7.5 per cent while CRR was kept unchanged at 4.0 per cent. RBI however reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 99% of the requirement to 95% effective from the fortnight beginning September 21.
Economists had widely expected the RBI to leave the repo rate unchanged. The central bank decision to reduce the Marginal Standing Facility (MSF) rate by 75 basis points to 9.5% was however on expected lines.
A hike in repo rate is being perceived negatively in the light of overall slowdown in the economy. Driven by costlier food items, wholesale price inflation rose to a six-month high of 6.1% in August.
The central bank said it is now possible to contemplate easing exceptional cash tightening measures in a calibrated manner.
The rupee was trading 61.98 post the policy announcement compared to yesterday's closing level of 61.77/dollar.
Nearly all sectors traded in red barring healthcare and IT. BSE Realty, was the top loser down nearly 6% followed by banks, capital goods and auto all down in the range of 1-4%. and metal indices.
Sun Pharma, Wipro, Gail India were among the Sensex gainers.
The market breadth on BSE is negative with 657 gainers and 1400 losers.
Asian shares paused on Friday as investors sat back to ponder the US Federal Reserve's policy outlook, a day after the world's most powerful central bank triggered a global rally in riskier asset markets with an unexpected decision to maintain its stimulus program. The dollar drifted off a seven-month low against a basket of major currencies and US Treasury yields rose after a string of upbeat US data provided a reminder to markets that the Fed is not far off from the day when it starts to cut stimulus.
Asian markets finished mixed as of the most recent closing prices. The Hang Seng gained 1.67% and the Shanghai Composite rose 0.29%. The Nikkei 225 lost 0.16% a day .
Japanese shares were up 0.2% in early trade, while Australian stocks were a tad softer. Markets in China and South Korea were closed for the mid-autumn holiday.
US stocks retreated slightly on Thursday as investors paused after the Federal Reserve's decision to keep its stimulus intact sparked a rally that lifted the Dow and S&P 500 to record highs. Major US stock indexes oscillated between modest gains and losses on the heels of Wednesday's rally, with the S&P showing a swing of less than 10 points between the high and low of the session.
The Dow Jones industrial average fell 40.39 points or 0.26%, to 15,636.55, the S&P 500 lost 3.18 points or 0.18%, to 1,722.34 and the Nasdaq Composite added 5.743 points or 0.15%, to 3,789.384.
The S&P hit 1,729.86, a record intraday high. The broad benchmark and the 30-stock Dow industrials closed at record highs Wednesday, while the Nasdaq Composite closed at its highest in 13 years.
Policy impact on sectors
Shares of rate sensitive sectors such as real estate, infrastructure, automobiles and banking are under pressure falling by up to 12% on the bourses amid concerns that hardening interest rates will hit demand for new loans, housing and vehicles.
The Reserve Bank of India (RBI) today raised the repo rate by 25 basis points to 7.50% cent in a bid to check inflation.
The National Stock Exchange (NSE) CNX Realty index which track the price movements of real estate stocks have plunged 8%, banking index Bank Nifty was down 6%, while CNX Auto and CNX Infra index are down 3% each at 1140 hours.
