Sensex falls; surprise rate hike continues to hurt banks

Reuters Market Eye - The BSE Sensex fell more than 1 percent on Monday, heading for a second consecutive day of declines, after Reserve Bank of India (RBI) Governor Raghuram Rajan surprised markets in his maiden policy review on Friday by raising interest rates to ward off rising inflation.

The BSE Sensex was trading down more than 200 points while the broader Nifty fell over 70 points at 10.28 am.

The RBI may raise policy rates again after shocking markets by increasing them in only his first meeting, signalling Rajan is willing to risk prolonging what is already the lowest economic growth in years in order to quash persistent inflation.

 

The NSE bank falls 3.7 percent, adding to Friday's 4.1 percent slump.

ICICI Bank Ltd falls 3.9 percent while State Bank of India Ltd is down 3.95 percent.

However, Titan Company Ltd gains 0.9 percent as India will start buying gold again after a two-month gap as the government and banks have agreed how new rules on imports should work, dealers say.

(Reporting by Abhishek Vishnoi)