Markets slip as RBI holds rates

Equities suffered for the second straight session on Wednesday after the Reserve Bank kept interest rates on hold but raised the inflation forecast, dashing medium-term rate cut hopes and sparking a sell-off in the banking stocks.

The Sensex slumped 205 points, or 0.63 per cent, to end at 32,597.18, while the broader NSE Nifty finished at 10,044.10, down 74.15 points, or 0.73 per cent.

The six-member Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, kept the policy rate unchanged at six per cent on expected lines but raised the inflation forecast for the remainder of the fiscal year to 4.3-4.7 per cent. The RBI kept the economic growth forecast unchanged at 6.7 per cent for the financial year ending March 31.

The 30-share index fell to 32,597.18 after hitting a low of 32,565.16 soon after the central bank announced its policy decision. The Nifty hit a low of 10,033.35 before finishing at 10,044.10. 

Interest rate-sensitive stocks took a beating, dragging the BSE banking index down 1.23 per cent. SBI, ICICI Bank, Axis Bank, HDFC Bank, Bank of Baroda, Punjab National Bank and YES Bank fell by up to 2.27 per cent.

“Given that interest rates are unlikely to reduce at least in the near to medium term, rate sensitive stocks slid due to rising oil price and concern over fiscal slippage,” said Vinod Nair, head of research, Geojit Financial Services.

The rupee, too, weakened to quote at 64.55 against the dollar intra-day.