Sensex plunges 353 points as RBI rate hike spooks markets (Roundup)

July 26th, 2011 - 7:33 pm ICT by IANS  

Sensex Mumbai, July 26 (IANS) A benchmark index for the Indian equities markets plummeted sharply to close 353 points lower Tuesday after a surprising 50 basis point hike in the repo rate by the Reserve Bank of India (RBI).

Interest rate-sensitive stocks like realty, auto and banking were expectedly among the hardest hit.

The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 18,898.19 points, closed at 18,518.22 points, down 353.07 points or 1.87 percent from its previous close at 18,871.29 points.

The repurchase rate, or the interest levied by the central bank on short-term borrowing by commercial banks, has been revised to 8 percent from 7.5 percent, while the reverse repurchase rate — the interest on short-term lending — was hiked to 7 percent from 6.5 percent.

The rate hikes were effected by Reserve Bank of India (RBI) Governor Duvvuri Subbarao during the first quarterly review of the apex bank’s monetary policy for this fiscal conducted at his Mint Road headquarters here.

The 50-scrip S&P; CNX Nifty of the National Stock Exchange also ended lower at 5,572.4 points, down 1.9 percent.

Broader markets too closed in the red. The BSE midcap index moved down 1.01 percent and the BSE smallcap index closed 0.8 percent lower.

The market breadth at the BSE was negative with 1,000 stocks advancing, 1,887 on the decline and 117 remaining unchanged.

Interest rate sensitive stocks like realty, banking and auto stocks closed weak. All 13 sectoral indices on the BSE closed in the red.

“Given the negative surprise, markets reacted with a sell-off. Interest rate sensitive sectors like banks, autos and real estate have witnessed higher selling pressure,” said Sanjeev Zarbade, vice president, private client group research, Kotak Securities.

“In addition to this, the rate hike is also particularly taxing for debt-laden companies as they would have to suffer higher interest charges,” he added.

Asian markets mostly ended in the green.

The Japanese Nikkei closed 0.47 percent higher at 10,097.72 points.

The Hang Seng of the Hong Kong stock exchange ended 1.25 percent higher at 22,572.08 points, while the Chinese Shanghai composite index closed 0.53 percent up at 2,703.03 points.

Among European bourses, Britain’s FTSE 100 was ruling 0.11 percent up at 5,931.86 points, and the French CAC 40 was ruling 0.58 percent lower at 3,790.96 points.

The German DAX was flat at 7,344.87 points.

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