Banking, realty, infra scrips plummet as RBI holds rate

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Market tumbles in knee-jerk reaction to money policy review

Banking and other interest rate-sensitive stocks such as real estate and infra stocks witnessed severe hammering after the central bank decided to keep interest rate unchanged, igniting worries that a higher interest scenario would delay pick up in investment climate and in turn hamper credit growth.

The broader market did not cheer the token 25 basis point cut in cash reserve ratio (CRR), as the widely-anticipated drop in key rates failed to materialise, leading to a sharp fall in key indices which also under-performed other Asian gauges.

While BSE Bankex was the biggest laggard, ending 2.35 per cent lower at 12,870.61, benchmark Sensex ended 1.10 per cent down at 18,430.85.

Other rate-sensitive indices such as BSE Realty index fell 2.28 per cent to 1,746.63 while BSE Auto index declined 1.37 per cent at 10,149.90. The BSE Capital Goods lost 2.09 per cent on fears that companies may hold back capex due to high interest rates.

Hemant Kanawala, head of equities, Kotak Life Insurance, said, “It was a knee-jerk reaction to today’s RBI policy and downward trend in most of these interest-rate sensitives may continue in the next few sessions. But, things may settle going ahead and selective buying in banking and other rate-sensitives could be seen.”

Dipen Shah, head-private client group research, Kotak Securities, said, “RBI has also hiked the provisioning on restructured book by 75bps to 2.75 per cent which could impact the profit before tax of banks depending of the existing stressed portfolio. PSU banks are likely to see greater impact.”

Shares of Canara Bank tumbled six per cent to Rs 395.70, Bank of Baroda declined 4.6 per cent to Rs 719.10, SBI eased 4.4 per cent to Rs 2,074.15, Union Bank of India fell 4.1 per cent to Rs 192.85 and Punjab National Bank was down 3.6 per cent at Rs 729.75.

Other banking laggards such as Axis Bank, IDBI Bank, Bank of India, ICICI Bank and Kotak Mahindra Bank ended 2-3 per cent lower.

Kishor P Ostwal, CMD, CNI Research, said, “Today’s market behaviour is a knee jerk reaction to RBI action of no rate cut. At the same time RBI has already hinted to cut rates in December which will augur well for market rally, going forward.”

With RBI refraining from slashing the repo rate, investors also shunned realty stocks amid worries that higher interest rates would impact the realty companies, which are already reeling under high debt and rising input costs.

In the realty space, Prestige Estates shed five per cent to Rs 148.90, HDIL eased 4.9 per cent to Rs 92.95, Indiabulls Real Estate declined 3.9 per cent to Rs 56.75, DB Realty fell 3.7 per cent to Rs 93.30 and Unitech was down 2.9 per cent at Rs 23.45.

Automobile shares, too, lost ground with Tata Motors falling 3.5 per cent at Rs 247.70, Hero Motocorp shedding 1.8 per cent at Rs 1,871.95 and M&M ending 1.6 per cent lower at Rs 873.80. Among the infra stocks, Larsen & Toubro slipped nearly three per cent to Rs 1,637 a share.

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