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    Sensex, Nifty under pressure after RBI rate hike, withdrawal of accommodation

    Synopsis

    Barring FMCG, all sectors were trading in the negative. Among rate-sensitive sectors, Nifty Bank lost 0.37%, while Nifty Auto was down 0.75%. Nifty Realty was the top loser, as it lost 1.5%.

    bseAgencies
    The domestic equity market remained under pressure for the third day in a row today after RBI Governor Shaktikanta Das chose to hike the repo rate by 35 basis points and maintained its focus on the withdrawal of accommodation. Sensex lost around 200 points while Nifty slipped below the 18,600 mark.

    Barring FMCG, all sectors were trading in the negative. Among rate-sensitive sectors, Nifty Bank lost 0.37%, while Nifty Auto was down 0.75%. Nifty Realty was the top loser, as it lost 1.5%.

    Barring AU Bank and ICICI Bank, all counters in the banking index were in the negative zone. Auto stocks lost up to 1.5%, with Tata Motors, Hero Moto and Ashok Leyland being the top losers in the pack.

    In the realty index, Oberoi Realty was the top loser and was down 3%. Other losers include Brigade Enterprises, DLF and Lodha.
    The 35 bps hike was in line with the market expectations. However, the central bank continues to focus on anchoring inflationary expectations and retaining the withdrawal of accommodative monetary and liquidity stance.

    "The RBI has given a “Main Hoon Na” (we are there) policy, reassuring the market. In a world where central banks are fighting to regain credibility, the RBI stands tall managing conflicting objectives of growth and inflation admirably. A data-driven RBI will keep on playing balls on merit and continue to keep the growth scoreboard moving with inflation under check," said Nilesh Shah, Managing Director, Kotak Mahindra AMC.

    The financial sector has historically been among the most sensitive to changes in interest rates. Typically, during a rising interest rate scenario, the banking sector passes on rate hikes through the floating rate loans while delaying the rate hikes for deposits, benefitting from spreads, and expanding margins.

    "A change in stance to dovish going forward by RBI will lead to a rally in the banking segment while a prolonged hawkish stance will impact deposit rates and lead to narrowing NIMs, more so for PSBs. Overall, the economy seems to be in good shape, and a peak rate of 6.7% is not an unusually high number for domestic markets. Thus, we don’t see any material impact on the stock market, but second order consumption impact we will watching closely, especially on the consumption side," said Anil Rego, founder and fund manager at Right Horizons PMS.

    Sharekhan said it remains positive on equity markets in the near-to-medium term, with real estate, banks, consumer and engineering/capital goods as preferred sectors.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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