‘Unexpected’ RBI status quo hits bank stocks, Sensex loses 156 points

THE benchmark Sensex on Wednesday fell by 156 points after the Reserve Bank decided to leave interest rates untouched, disappointing the markets which were expecting a 25 basis points cut in Repo rate.

The 30-share index declined by 155.89 points, or 0.59 per cent, to 26,236.87 after moving between 26,540.83 and 26,164.82. The Sensex had gained over 162 points in the previous two sessions.

The wider Nifty hit a low of 8,077.50 before recovering partially to settle at 8,102.05, down 41.10 points or 0.50 per cent. It touched a high of 8,190.45 in early trade.

Vinod Nair, head of Research, Geojit BNP Paribas Financial Services, said, “The market plunged after an unexpected pause from the RBI on key rates while the reduction in growth from 7.6 per cent to 7.1 per cent in FY17 added a further blow to investors’ sentiment. The market had already factored a 25 bps cut in interest rate, hence this status quo has come as a negative surprise for the market. We expect more volatility going forward as commodity prices like oil and metals are inching up and the outlook for rupee remains lacklustre on account of US Federal Reserve rate hike expectation.”

The rupee surged by another 27 paise to end at over three-week high of 67.63 even as the RBI unexpectedly kept policy rates steady. Heavy selling of the US dollar by banks and exporters in the face of renewed capital inflows predominantly kept sentiment highly buoyant.

“Early heights achieved on the back of firm global markets, added to the steepness of the fall after the RBI announced status quo in key rates. The negative reaction was largely because recent decline in headline inflation figures had cemented hopes of easing even before demonetisation worries added weight to the expectations. The rupee reversed gains, which though was short lived,” said an analyst. Interest rate-sensitive banking stocks such as SBI, HDFC Bank, ICICI Bank and Axis Bank reacted strongly, all of which fell by up to 2 per cent.

Sun Pharma fell 5.96 per cent, followed by TCS 1.47 per cent, Tata Steel 1.40, Lupin 1.33 per cent and ITC 1.17 per cent. The BSE healthcare index shed 1.70 per cent, followed by realty 1.49 per cent and banking 1.07 per cent.