Interest rate sensitive counters including ICICI Bank, DLF, M&M took a beating on bourses today as investors, who were expecting the RBI to ease its tight monetary policy, were disappointed with the central bank maintaining status quo.
According to market experts, rate sensitive sectors had been gaining strengths in anticipation of a rate cut. The recent 75 basis points cut in cash reserve ratio had also pushed the share prices of companies associated with these sectors.
By keeping interest rates unchanged today the RBI dashed investors' hopes and today's fall was attributed to profit booking trend, they noted.
"Markets were expecting a rate cut from the central bank and hence, were disappointed by the announcement of status quo. Banking stocks were the worst hit as they tanked in unison on the policy announcement," Bonanza Portfolio Senior Research Analyst Shanu Goel said.
Shares of realty major DLF closed 4.76% down over yesterday's close. HDIL shed 3.72%, Unitech declined 3.24% and Oberoi Realty lost 1.83%.
Following the sharp losses registered in these stocks, the BSE Realty index closed 2.66% lower at 1,821.35 points today.
In the financial space, Bank of India lost 4.13%, Canara Bank fell by 3.84%, HDFC Bank plunged 3.05%, ICICI Bank declined by 2.47%, SBI dropped by 2.21%. IDBI Bank was the worst hit losing 4.46% in the session.
However, some experts felt the RBI policy review was along expected lines. "RBI's move was in line with expectations and it has maintained a status quo on rates given that it had already just cut CRR on Friday to address the increase liquidity strain in the market," ICICI Prudential AMC Head Fixed Income Chaitanya Pande said.
We continue to believe that RBI will initiate rate action only in the first quarter of next fiscal, he noted.
These losses pushed the BSE Banking index down 2.60% and it closed at 12,203.29 points.
In the auto pack, Ashok Leyland declined by 3.68%, Mahindra & Mahindra lost 1.58% and Bajaj Auto fell by 1.41%. Hit by losses, the BSE Auto index lost 0.70% to end the day at 10,132.48 points.
The Reserve Bank today kept the interest rate unchanged for now. The benchmark policy interest rate (repo rate) at which RBI lends to banks has been kept unchanged at 8.5%.
The cash reserve ratio, the portion of deposits banks need to keep with RBI, has also been retained at 4.75%. But this rate was reduced on March 10 by 0.75 percentage points to infuse Rs 48,000 crore in the system to ease liquidity.
In the broader market, the BSE benchmark Sensex closed at 17,675.85 points, down 1.36%.
