The 30-share Sensex fell for fourth day in a row and Nifty 50 index closed below its important psychological level of 18,600 after the Reserve Bank of India hiked key interest rate by 35 basis points taking the repo rate to 6.25 per cent. The RBI's Monetary Policy Committee delivered its fifth straight increase as inflation remains elevated, and the central bank says that there will be no let up in flight to tame inflation.
The Sensex fell as much as 310 points and Nifty 50 index touched an intraday low of 18,528. The Sensex declined 216 points to close at 62,410 and Nifty 50 index fell 82 points to close at 18,560.
"MPC was of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break core inflation persistence and contain second round effects...," the RBI Governor Shaktikanta Das said on Wednesday.
Monetary Policy Committee's majority view was to withdraw accommodative stance, he said. Talking about inflation, Das said it would stay above 4 per cent for the next 12 months in India.
RBI lowered the economic growth projection to 6.8 per cent from the earlier estimate of 7 per cent for the current fiscal. However, Das said despite a marginal downward revision in GDP growth at 6.8 per cent, India remains the fastest growing major economy.
The RBI Governor cautioned that the battle against inflation is yet not over as risks remain, adding that RBI's action remains nimble in the best interest of the economy.
Interest rate sensitive banking, real estate, financial services and auto shares came under selling pressure after RBI's rate hike move.
Selling pressure was largely visible across the board as nine of 11 sector gauges compiled by the National Stock Exchange ended lower led by the Nifty Media index's 1.4 per cent decline. Nifty Realty, IT, Auto, Metal and Pharma indices also fell between 0.6-1 per cent each.
On the flipside, PSU Banking and FMCG shares witnessed buying interest.
Mid- and small-cap shares also faced selling pressure as Nifty Midcap 100 index and Smallcap 100 indices fell 0.6 per cent each.
Among the individual shares, Siemens surged 5 per cent to Rs 2,905 after it emerged as the lowest bidder for the 9,000 HP Electric Locomotives project in Dahod, Gujarat, India.
SBI Life was top Nifty loser, the stock fell 2 per cent to close at Rs 1,259. NTPC, Bajaj Finserv, Tata Motors, Bajaj Auto, Reliance Industries, IndusInd Bank, Tata Steel, Apollo Hospitals and Sun Pharma were also among the losers.
On the flipside, Hindustan Unilever, Bharat Petroleum, Asian Paints, Larsen & Toubro, Axis Bank, ITC and Mahindra & Mahindra were among the gainers.
The overall market breadth was negative as 1,981 shares ended lower while 1,518 closed higher on the BSE.
