- RBI in a surprise move hiked the benchmark lending rate to contain inflation
- This is the first-rate hike by the RBI since August 2018
- The six-member MPC unanimously voted for a rate hike while maintaining the accommodative stance
Equity benchmarks Sensex and Nifty crashed by more than 2 per cent each on Wednesday soon after the Reserve Bank of India (RBI) increased the benchmark lending rate by 40 basis points to 4.40 per cent and cash reserve ratio (CRR) by 50 basis points to 4.5 per cent in a surprise move.
The six-member rate-setting panel -- Monetary Policy Committee (MPC) unanimously voted for a rate hike while maintaining the accommodative stance in an unscheduled meeting of the committee.
After surging over 200 points in early trade, the 30-share BSE benchmark declined over 700 points to trade below 56,250 in the afternoon. Later, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60. It finally settled at 55,669.03 after tumbling 1,306.96 points or 2.29 per cent at 3:30 PM from the previous closing of 56,975.99 on Monday.
Likewise, Nifty too had opened in green but gave up the gains shortly and turned southward. Nifty crashed more than 200 points to slip 16,900 at 1 PM. After Das held a press conference, the index crashed more than 400 points to slip below 16,700. It finished at 16,677.60 after declining 391.50 points or 2.29 per cent from Monday's closing of 17,069.10.
From the Sensex pack, Titan, Bajaj Finserv, Bajaj Finance, IndusInd Bank, HDFC Bank, RIL, Asian Paints, Maruti and Dr Reddy's were the prominent losers. In contrast, PowerGrid, NTPC and Kotak Mahindra Bank closed in the green.
The Nifty 50 pack was dragged majorly by heavyweights Reliance, HDFC Bank, Bajaj Finance ICICI Bank and HDFC. Britannia, ONGC and Power Grid were among the gainers.
"The MPC's decision, in an unscheduled meeting, to raise the repo rate by 40 bps and CRR by 50 bps is a surprise since it came on the LIC IPO opening date. MPC's proactive move is justified from the perspective of inflation management, but the timing leaves a lot to be desired. The above 1,000 point crash in Sensex has soured the sentiments on the opening day of India's largest IPO," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Markets in Seoul and Hong Kong settled in the red. Bourses in Europe were also trading lower in the afternoon session. Stock exchanges in the US surged in trade on Tuesday. Meanwhile, international oil benchmark Brent crude jumped 3.12 per cent to USD 108.3 per barrel.
Foreign institutional investors offloaded shares worth Rs 1,853.46 crore on Monday, according to stock exchange data.