Markets turn volatile post rate hike

The markets have turned fairly volatile post the rate hike by Reserve Bank of India (RBI). After a sharp recovery, wherein the Sensex rebounded into the green and touched a high of 18,155, has now again dipped into the red. The Sensex has now shed 107 points at 18,025. The Nifty has dropped 35 points to 5411.

The central bank hiked the key rates for the tenth time since March 2010 to tackle the spiraling inflation. The key rates were hiked by 25 basis points. The repo rate has been raised to 7.5%, reverse repo rate now stands at 6.5% while the cash reserve ratio remains unchanged.

In a press release the Reserve Bank of India, said the policy stance remains anti-inflationary and the inflation persists at uncomfortable levels.

Back to markets, Sterlite Industries continued to remain the top loser on the Sensex. The stock slid 2.5% to Rs 158. TCS was down 1.8% to Rs 1158. Maruti Suzuki, Bajaj Auto, Wipro, Reliance Industries, Cipla, Larse & Toubro, Jindal Steel and Tata Steel were also trading in the red. On the other hand, Hindustan Unilever, SBI, HDFC and BHEL were among the notable gainers.

The rate sensitive sectors did not react much to the rate hike as it was in line with the street expectations. BSE Banking index- Bankex was at 12,091, lower by 52 points or 0.43%. The Realty, capital goods and auto indices also shed 0.6-0.8% each.

Meanwhile, all the sectoral indices were trading in the red. The BSE IT index was the top sectoral loser, down 1.2% or 73 points at 5962, Oil & Gas index slid 1.13% or 103 points at 9093.

Patni Computer, Mphasis, Tech Mahindra, TCS, HCL Technologies, Wipro and Infosys were the losers among the IT stocks. Among the Oil & Gas stocks Reliance Indsutries was the top loser, the stock was trading near its 52 week low at Rs 890. GAIL India, Indian Oil Corporation, Cairn India and HPCL were also among the losers.

The broader markets were also trading in the red. The BSE Mid-cap index was at 6878, down 43 points and the small-cap index shed 33 points at 8262.

The overall breadth was negative as 1,557 stocks declined while 996 stocks adavanced.

Meanwhile the European markets too have opened in the red, putting additional pressure on our markets. The FTSE, CAC and Dax were all down around 1% each.