Stock indices fell almost 1 per cent today as a hike in key rates by the Reserve Bank of India (RBI) last week weighed on the markets. Shares of interest rate-sensitive sectors such as real estate and auto came under selling pressure. The major losers among the Bombay Stock Exchange’s (BSE’s) Sensex were DLF, Jaiprakash Associates, Hindalco, Tata Motors and Reliance Industries.
India’s central bank on Friday raised the repo rate, at which banks borrow from RBI, by 25 basis points to 5 per cent. It raised the reverse repo rate, the rate at which surplus cash of banks is parked with the central bank, to 3.5 per cent from 3.25. Analysts expect another 25 basis points hike in April during RBI’s quarterly review of the monetary policy.
The move hit the broader market sentiment and Sensex fell 0.95 per cent, or 167 points, to end the day at 17,410. The National Stock Exchange’s Nifty fell 1.09 per cent, or 57.6 points, to close at 5,205. BSE mid- and small-cal indices shed 1.05 per cent and 0.85 per cent, respectively, in line with the fall in major indices.
“The increase in repo and reverse repo rates put pressure on interest-rate sensitive sectors such as real estate and auto. We are also nearing the derivatives settlement cycle and the end of the financial year. Hence, fresh buying is not happening. The global markets, too, were weak, leading to the fall,” said D D Sharma, vice-president (research), retail at Anand Rathi Securities.
Real estate stocks were the biggest losers with the BSE Realty Index down 3.88 per cent. Indiabulls Real Estate fell 6.7 per cent to Rs 149.50, followed by Housing Development and Infrastructure Limited, which fell 5.8 per cent to Rs 281.95. Others that fell were DLF, Omaxe and Orbit Corporation. Analysts fear rate hikes will increase the cost of loans, nullifying a perceived revival in the real estate sector.
BSE’s Auto Index lost 1.73 per cent to close at 7,497.42 points. Some of the major losers were Apollo Tyres and Amtek Auto, which shed close to 6 per cent and 4 per cent, respectively. Metal stocks saw a correction of 1.96 per cent after rising for the last few sessions. The banking sector came under pressure with BSE Bankex down 0.85 per cent.
“Banking stocks tried to take the index up during last hour of trade, but could not sustain. We expect the Nifty to rally to 5,300 after this phase of correction. A lot of investors are booking profits with the year-end round the corner. The Nifty might correct another 1 per cent, after which investors will enter with long positions. Globally, markets have remained range-bound in the absence of any major trigger. The healthcare sector is expected to gain some ground on the back of healthcare reforms proposed by the Obama administration,” said K N Rehman, head of research at Way2Wealth Brokers Private Limited.
Healthcare bucked the trend with the BSE Healthcare Index rising 0.26 per cent. The new set of reforms planned in the US is expected to ease approvals, marketing and licensing of drugs for Indian players. Lupin, Dr Reddy’s Laboratories and Divis Laboratories rose.
Among the international markets, Japan’s Nikkei climbed 80.69 points to close at 10,824.72. Hong Kong’s Hang Seng lost 47.57 points to 20,933.25, followed by Taiwan index, which lost 61.93 points to close at 7835.98. European markets were also trading weak.
Foreign institutional investors bought shares worth Rs 302.78 crore, while domestic institutions, including mutual funds and insurance companies, sold shates worth Rs 33.14 crore, according to provisional data on BSE.
