NEW DELHI: After a positive start, domestic equity market declined sharply on Thursday following the Reserve Bank of India’s (RBI) decision to maintain the key interest rates unchanged for the sixth straight time. Foreign institutional investors (FII) selling intensified on the weekly expiry day.
RBI Governor Shaktikanta Das-led six-member Monetary Policy Committee (MPC) maintained repo rate at 6.5%. The panel’s “withdrawal of accommodation” stance and focus on bringing down inflation rate to about 4% level made investors less optimistic about a rate cut in the near future.
The BSE Sensex closed 723.57 points or 1% lower at 71,428.43 level while the Nifty50 closed at 21,717.95 level, down 212.55 points or 0.97% from the previous day closing. Broader markets also closed lower. Nifty Midcap 100 plunged 0.05% and Nifty Smallcap 100 fell 0.39%.
Foreign institutional investors sold shares worth `4,934 crore (net) during the day. All the rate-sensitive sector stocks, especially shares of private banks, experience heavy profit booking. “Selling intensified after the RBI’s monetary policy announcement in the first half with heavy selling in private banking scrips leading the slump.
Banking industry has been facing liquidity issues in recent times and with the central bank’s decision showing no signs of interest rate cut in the near term, investors slashed their positions in financial stocks,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.
Sector wise, Nifty Private Bank, fell most on Thursday, down 2.59%. Nifty FMCG, Nifty Financial Services and Nifty Auto also witnessed heavy selling.
Inflation
Panel’s ‘withdrawal of accommodation’ stance and focus on bringing down inflation to 4% made investors less optimistic about a rate cut in the near future