There was panic selling on Dalal Street after the central bank raised the key lending rates. The rate hike triggered a 353 points fall in the BSE’s Sensex which closed at 18,518.22.

The broader NSE Nifty index too fell by 105.45 points to 5574 points.

Rate-sensitive sectors such as realty, infrastructure financing companies, banks, automobile and capital goods were the worst hit due to the unexpected rate hike, as the street had expected only 25 basis points hike.

There was partial recovery after the benchmark index fell by 389.66 points, dipping to an intra-day low of 18,481.66 points and Nifty by 120.15 point to 5550.15.

IT, technology and healthcare sector companies were able to buck the trend with the stocks of those companies suffering minimal damages (0.10 to 0.65 per cent) while the benchmark indices fell 1.8 per cent.

Sudip Bandyopadhyay, MD and CEO at Destimoney Securities said the rate hike by the RBI could further accentuate the problem for rate-sensitive sectors. “While credit growth has been slow so far, banks could see their net interest margins coming under pressure, for autos demand may be impacted as loans will get costlier and higher input costs will dent margins,” said Bandyopadhyay.

Shares of all listed banks came under selling pressure post RBI announcement, with top losers being SBI (2.86 per cent), Kotak Mahindra Bank (4.26 per cent), Yes Bank (3.98 per cent), Bank of India (3.64 per cent), ICICI Bank (3.13 per cent).

Among the automobile manufacturers, top losers were Mahindra & Mahindra (4.20 per cent), Tata Motors (3.06 per cent), Bajaj Auto (1.72 per cent).

Foreign institutional investors were net sellers of equities worth Rs 177 crore while the domestic institutional investors were net buyers by Rs 31.5 crore according to the provisional data released by the exchanges.

Sanjeev Zarbade, vice president (private client group research), Kotak Securities, said the rate hike is also particularly taxing for debt-laden companies as they would have to suffer higher interest charges.

Aneesh Srivastava, CIO, IDBI Federal Insurance Company said, “RBI has moved on the assumption that growth is still strong and expects 8 per cent-plus GDP growth. However, this may remain just an assumption as high interest rates would hurt consumption and investment both, the two key drivers of India’s growth.”

Shanu Goel, senior research analyst, Bonanza Portfolio, said, “Corporate’s were already ruing the high cost of funds resulting in their margin squeeze and another hike of 50 bps would further adversely affect their demand and profitability.”

(With inputs from Prasanna Deshpande)

raviranjan@mydigitalfc.com