Stock market indices fell 2.3%; Inflation remains major overhang, analysts say, with impact of Russia war and Shanghai lockdown
Stock market indices fell 2.3%; Inflation remains major overhang, analysts say, with impact of Russia war and Shanghai lockdown
The sudden decision of the Reserve Bank of India (RBI) to raise interest rates with immediate effect on Wednesday triggered a huge sell-off in equities.
Major indices crashed 2.29% in reaction to the growth. The last time the repo rate was hiked was in August 2018. This time the market was not ready for the off-cycle announcement.
The S&P BSE Sensex ended 1.306.96 points or 2.29% lower at 55,669. The top losers were Bajaj Finance, falling 4.29%; Bajaj Finserv (-4.18), Titan (-4.11), IndusInd Bank (-3.98) and HDFC Bank (-3.34)
Similarly, the NSE Nifty-50 index fell 319.50 points or 2.29% to 16,677.60.
“Surprising RBI event in later half” [of the day] led to a sharp decline in the markets. Nifty not only breached its crucial support but it ended well in the red below 16,700,” said Ruchit Jain, Lead Research, 5paisa.com.
Mitul Shah, Head of Research, Reliance Securities said, “Domestic stocks closed sharply lower due to heavy selling after RBI announced a 40 bps hike in repo rates in a surprise and unscheduled meeting.”
“For equities, inflation remains a significant overhang, coupled with the multi-pronged impact of Russia’s lingering war with Europe and stricter lockdowns in Shanghai,” he said.
“Moreover, the trend in global stock markets and the movement of rupee and crude oil prices will determine the market trend in the near term,” he added.
Despite negative sentiment, Life Insurance of India’s (LIC) initial public offering, which opened on Wednesday, received an encouraging response from policyholders and retail investors. The IPO was subscribed 0.65 times on the first day at 6 pm.