Sensex sheds 209 pts as RBI raises key rates

Indian equity indices lost ground on Thursday over concerns of further monetary tightening after the Reserve Bank of India (RBI) raised key interest rates for the eighth time this year. Rate sensitive sectors, including bank, auto and realty came under heavy selling pressure as foreign investors also dumped Indian shares.

The 30-share Sensex of the Bombay Stock Exchange (BSE) lost 208.82 points, or 1.14 per cent, to end at 18,149.87. Most of the sectoral indices also ended in the red. The market breadth was negative with over 1,600 stocks losing ground, as against 1,203 gainers. The broader Nifty of the National Stock Exchange (NSE) ended the day at 5,446.65, shedding 64.50 points or 1.17 per cent.

“RBI has acted on expected lines,” said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services. “Inflation is still on top of RBI’s mind, so it has continued tightening the monetary policy even at the cost of growth momentum slackening,” he added.

While the central bank’s act was on expected lines, it did not keep investors away from off-loading shares in large quantities. According to provisional numbers, foreign institutional investors (FIIs) were net sellers at Rs 1,129 crore on Thursday. FIIs have pulled out nearly $2 billion since the start of the current calendar year.

Banking majors like State Bank of India and ICICI Bank lost 0.94 per cent and 1.37 per cent, respectively. Bank of India lost more than three per cent.

The BSE Auto index lost a little over 110 points, or 1.27 per cent. Reliance Communications, interestingly, gained 3.50 per cent after Citigroup upgraded the stock to ‘buy’ from ‘sell’. It closed at Rs 106.55 after losing ground on the past few occasions. Citi also upgraded Idea Cellular to ‘buy’ from ‘sell’.