MUMBAI: Indian markets ended sharply lower as higher-than-expected hike in key interest rates by the Reserve Bank of India spooked sentiments. Rate sensitive were beaten down badly on concerns that rising interest rate would impact business adversely.
The central bank took the market by surprise by hiking both repo rate and reverse repo rate by 50 basis points in its first quarterly review of the monetary policy for the fiscal. According to analysts, the rate hike is likely to continue as long as inflation is not under RBI's desired level.
"With inflation likely to remain elevated at 9%+ and even touch double-digit levels on revisions in the coming months, we expect theRBI to elongate its tightening cycle by a further ~50bps by Dec.
While maintaining its 8% GDP estimate, the RBI has raised its March 12 inflation estimate to 7% from 6%. This remains lower than our estimate of 8%. With banks immediately passing on the rate hike, we see further downside risks to our 8.1% GDP estimate," said Rohini Malkani, Economist, Citi India.
Bombay Stock Exchange'sSens*x ended at 18518.22, down 353.07 points or 1.87 per cent. The 30-share index touched intraday low of 18481.63 and high of 18944.60.
National Stock Exchange'sNifty closed at 5574.85, down 105.45 points or 1.86 per cent. The broader index touched a high of 5702.25 and low of 5560.15 in trade today.
"Market has corrected on huge volumes. The mood is not optimistic and quarterly results are also not impressive. We expect the market to remain rangebound in coming sessions. Nifty has strong support at 5500 and if that is breached then 5350 would be the next level to watch out for. On the upside, 5660 is strong resistance level," said Michael Pillai, technical analyst, Nirmal Bang.
BSE Midcap Index was down 1.01 per cent and BSE Smallcap Index moved 0.80 per cent lower.
Amongst sectoral indices BSE Realty Index fell 3.55 per cent, BSE Capital Goods was down 3.49 per cent, BSE Bankex moved 2.46 per cent lower and BSE Auto Index fell 2.14 per cent.
Reliance Communications (-6.13%),IDFC (-6.06%),BHEL (-4.55%), M&M (-4.45%) and DLF (-4.35%) were amongst the top Nifty losers.
Power Grid Corporation (0.46%), TCS (0.27%) and HCL Tech (0.12%) were the only index gainers.
Market breadth was negative on the NSE with 1971 losers against 1095 gainers.
Nifty falls to 5575 as rbi hikes rates by 50 bps
CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
26 July 2011
CAclubindia
