Indices decline for fourth day
The benchmark indices declined for a fourth consecutive session on Wednesday as the Reserve Bank of India (RBI) hiked the policy rate by 50 basis points.
The Sensex closed at 54,892, with a decline of 215 points, or 0.4 per cent, and the Nifty finished at 16,356, with a drop of 60 points, or 0.3 per cent.
A near 2 per cent drop in shares of index heavyweight Reliance Industries, accounted for the bulk of the losses. If not for RIL, the benchmark indices would have ended almost flat.
Among the factors that buoyed sentiment were the
RBI’S decision to maintain the economic growth forecast at 7.2 per cent and also maintain status quo on the cash reserve ratio (CRR). On the flip side, the increased inflation forecast of 6.7 per cent and risks of further upward pressure due to spike in oil prices kept sentiment in check.
“The market continued with range-bound movement as the RBI event was on expected lines. There are concerns in the market regarding high crude oil prices and weakening of the rupee against the dollar. We expect the market to remain lacklustre as macro headwinds continue with selling pressure emerging at higher levels,” said Siddhartha Khemka, head of research, Motilal Financial Services.
Foreign portfolio investors (FPIS) sold shares worth ~2,484 crore, while their domestic counterparts provided buying support to the tune of ~1,904 crore.
Share of real estate companies rose after the monetary policy as the RBI announced several measures to boost the sector, like raising the individual housing
loan limits for cooperative banks. The RBI also allowed rural cooperative banks to lend to commercial real estate projects. The BSE Realty index rose 1.8 per cent and was the best performing sectoral index on the BSE.
The BSE Bankex, on the other hand, declined 0.18 per cent. Shares of the State Bank of India rose 1.7 per cent, the second highest among Sensex components.
Market players said investors’ focus has shifted to the global market, which is anticipating a hawkish stance from the US Federal Reserve at its meeting next week.
“As the RBI policy is behind us, markets will take cues from global markets and upcoming macroeconomic data. We reiterate our cautious view citing a lacklustre move in the index, and suggest maintaining positions on both sides,” said Ajit Mishra, vice-president of research, Religare Broking.
Asian markets rose on Wednesday, aided by the reopening in China, but European shares fell as investors braced for the European Central Bank's meeting on Thursday. The ECB is set to wind down trillions of euros of asset purchases and is expected to hike rates in July after eight years of negative interest rates.
Investors are worried that monetary tightening will stifle global growth. The US consumer price index data, which is set to be released later this week, will provide clues to investors on the rate hike path of the US Fed.
The war in Ukraine has added to the list of central bankers’ woes. It has led to a surge in commodity prices, making inflation difficult to manage, despite hikes by major central banks across the world.
THE BSE BANKEX DECLINED 0.18% BUT SHARES OF SBI ROSE 1.7%, THE HIGHEST AMONG SENSEX COMPONENTS