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RBI-policy rally halts as Sensex, Nifty retreat from near record levels

By Reuters

  • 08 Jun 2023
RBI-policy rally halts as Sensex, Nifty retreat from near record levels
Credit: Reuters

Indian shares snapped a four-day winning streak on Thursday, weighed by auto and consumer stocks after the Reserve Bank of India pushed bets of a rate cut further ahead, with inflation seen to be staying above its target.

The blue-chip Nifty 50 index closed 0.49% lower at 18,634.55, while the benchmark S&P BSE Sensex fell 0.47% to 62,848.64.

The RBI's monetary policy committee (MPC) kept the repo rate at 6.50% for a second straight meeting but signalled that monetary conditions would remain tight for some time on fears of inflation staying above the central bank's 4% target this year.

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Overnight indexed swaps jumped after the policy statement, signalling markets were now pricing in a further delay in rate cuts.

"It is clear that the expectation of a rate cut in CY23 is pushed forward," said Amit Kumar Gupta, founder at Fintrekk Capital.

The stock indexes reversed course following a 0.30% spurt after the decision.

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Twelve of the 13 major sectoral indexes declined, with the fast moving consumer goods (FMCG), auto, pharma sectors losing between 0.8% and 1.1%.

The rate-sensitive realty index slid 1.6% and was the top sectoral loser. The realty index had risen for six sessions in a row in the run-up to the RBI rate decision, adding 6.59% over the period.

The midcap index fell over 0.5%, snapping a 13-session winning streak after logging a fresh record high in intraday trading.

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"Many small and midcap stocks are running up without any particular fundamental reason and mostly on low volumes," added Amit Kumar Gupta. "The game plan remains clear: buy slow, sell fast, stay with conviction and avoid junk."

High-weightage IT stocks fell over 1% on rate hike concerns ahead of policy decisions by the U.S. Federal Reserve and European Central Bank next week. All the 10 constituents of the IT index logged losses.

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