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Stock market indices drop 2.3%; inflation remains key overhang, coupled with impact of Russia war and Shanghai lockdown, say analysts
Stock market indices drop 2.3%; inflation remains key overhang, coupled with impact of Russia war and Shanghai lockdown, say analysts
The sudden decision of the Reserve Bank of India (RBI) to raise interest rates with immediate effect on Wednesday caused a major sell-off in equities.
Key indices crashed 2.29% in reaction to the development. The last time the repo rate was increased was in August, 2018. This time around, the market was not prepared for an off-cycle announcement.
The S&P BSE Sensex fell 1.306.96 points or 2.29% to 55,669. The top losers were Bajaj Finance that declined 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.
“The surprising RBI event in the later half [of the day] led to sharp correction across the markets. Nifty not only breached its important supports, but it ended well in the red below 16,700,” Ruchit Jain, Lead Research, 5paisa.com said.
“Domestic equities closed sharply lower due to heavy sell-off after RBI announced a 40 bps hike in repo rates in a surprise and unscheduled meeting.,” Mitul Shah, Head of Research, Reliance Securities said.
“For equities, inflation remains a key overhang, coupled with the multi-sided impact of Russia’s lingering war with Europe and strict lockdowns in Shanghai,” he said.
‘Moreover, the trend in global stock markets and the movement of the rupee and of crude oil prices, will dictate market trend in the near-term,” he added.
Despite the negative sentiment, the Life Insurance of India’s (LIC) initial public offering that opened on Wednesday received encouraging response from policyholders and retail investors. On day one, the IPO was subscribed 0.65 times at 6 pm.
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