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RBI's surprise rate hike rattles bourses

Sensex plummets 1,300 pts as RBI wrongfoots markets; Rate-sensitive stocks -realty, auto, bank stocks—tumble; Investors lose Rs6.27 lakh cr; Mcap of all BSE-listed companies at Rs2.59,61cr

RBI’s surprise rate hike rattles bourses

Wait for further weakness from current levels

Mkts At 2-mth Low

- It's third straight session of loss

- BSE Sensex 1,306.96 pts down at 55,669.03

- NSE Nifty tanked 391.50 pts to 16,677.60

- Bajaj Finance biggest loser in Sensex pack

- Bajaj Finserv, Titan, IndusInd Bank, HDFC Bank, Maruti and RIL fell

- Only 3 constituents -PowerGrid, NTPC and Kotak Mahindra Bank-managed to finish higher

Mumbai: Equities went into a tailspin on Wednesday after the Reserve Bank surprised the market with a mid-cycle rate hike in a bid to tame soaring inflation. The move came just ahead of the Federal Reserve's policy decision, with analysts expecting a similar move by the US central bank as well as the focus shifts to combating runaway price rise, exacerbated by geopolitical tensions.

After a choppy start, the 30-share BSE Sensex came under massive selling pressure following RBI's interest rate hike, closing 1,306.96 points or 2.29 per cent down at a two-month low of 55,669.03. This was its third straight session of loss. On similar lines, the broader NSE Nifty tanked 391.50 points or 2.29 per cent to finish at 16,677.60. The market capitalisation of all BSE-listed companies tumbled by Rs 6.27 lakh crore to stand at Rs2,59,60,852.44 crore.

"The MPC's decision is a surprise since it came on the LIC IPO opening date. MPC's proactive move is justified from the perspective of inflation management, but the timing leaves a lot to be desired. The above 1,000 point crash in Sensex has soured the sentiments on the opening day of India's largest IPO," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Unmesh Kulkarni, MD and senior advisor, Julius Baer India, adds: "The MPC's action comes in the wake of concerns that RBI may have under-estimated inflation, and is behind the curve in changing its monetary policy stance. The markets have obviously been taken by surprise, and the 10-year benchmark g-sec yield jumped intra-day to 7.40 per cent. Given the enhanced government borrowing calendar this year, RBI has a tough job at hand, to manage the market's expectations of yields while seeing the weekly auctions through in a non-disruptive manner."

Foreign institutional investors (FIIs) offloaded shares worth a net Rs1,853.46 crore on Monday, according to stock exchange data.

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