Rate hike impact: Rate sensitive shares tumble as RBI’s ups rate by 40bps

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Rate hike impact: Rate sensitive shares tumble as RBI’s ups rate by 40bps

Shares of rate sensitive sectors such as financials including banks, non-banking financial companies (NBFCs) and housing finance companies (HFCs), automobiles and real estate came down sharply up to 4 per cent after the Reserve Bank of India (RBI) Governor Shaktikanta Das today announced a surprise 40-basis-point (bps) hike in the key lending rate, repo, in an unscheduled announcement.

At 02:27 PM; the Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Auto and Nifty Auto index were down between 1.3 per cent and 2 per cent on the National Stock Exchange (NSE). Nifty Consumer Durable index, however, declined nearly 3 per cent. In comparison, the benchmark index Nifty50 index shed 1.5 per cent.

Shriram Transport Finance Company, Piramal Enterprises, Bajaj Finance, Bajaj Finserv, SBI Cards and Payment Services, HDFC, HDFC Bank and Cholamandalm Investment and Finance from the financials, Bajaj Auto, Ashok Leyland, TVS Motor Company, Eicher Motors, Maruti Suzuki India and Mahindra & Mahindra from automobiles and DLF, Indiabulls Real Estate, Godrej Properties, Sunteck Realty, Oberoi Realty and Brigade Enterprises from the realty were down in the range of 2 per cent to 4 per cent each.

RBI Governor Shaktikanta Das on Wednesday said the Monetary Policy Committee (MPC) has unanimously voted to increase repo rate by 40 basis points to 4.40 per cent with immediate effect. The governor said MPC ensured inflation remains aligned with the target while Indian economy has shown resilience helped by favourable policies despite the inflationary pressures.

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The surprise move came ahead of an expected rate hike from the US Federal Reserve later tonight and in the backdrop of retail inflation persistently staying above the central bank’s comfort zone.

Repo is the rate at which the central bank lends short-term funds to banks. The RBI had cut the repo rate by 250 basis points since February 2019 to help revive the growth momentum.

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