The benchmark indices are trading lower on Thursday after the 25 bps hike in repo and reverse repo rates by the Reserve Bank of India (RBI) on Wednesday.
Among individual stocks, Bharti Airtel has slipped over 3% at Rs 371 levels, while Maruti Suzuki is trading over 1.5% down at Rs9,195 levels.
Among sectoral indices, the Nifty Auto index is down nearly 1% due to a fall in share prices Motherson Sumi Systems and Maruti Suzuki. The Nifty Realty index too is trading over 1% lower due to DLF and Godrej Properties.
RBI MONETARY POLICY
RBI hiked policy rates for the second time in a row on fears of rising inflation rates.
Economists now expect the central bank to go in for a prolonged pause and wait to see the impact of the globally evolving scenario.
Following the rate hike, which was anticipated by many in the market, the policy repo rate stands at 6.50 per cent. The policy stance continued to remain neutral.
The Central Bank cautioned that India needed to “run a tight ship” to avoid getting affected by the currency war that had started all over the world.
It projected inflation at 4.6 per cent in the second quarter, and 4.8 per cent in the second half of the financial year 2018-19, with risks evenly balanced.
FED KEEPS RATES UNCHANGED
US Federal Reserve kept interest rates unchanged on Wednesday and characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September.
The Fed said economic growth has been rising strongly and the job market has continued to strengthen while inflation has remained near the central bank’s 2 percent target since its last policy meeting in June, when it raised rates.
The committee said it expects that “further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective,” repeating language from its June statement.
Market reaction to the Fed decision was muted as it met expectations. MSCI’s broadest index of Asia-Pacific shares outside Japan was off less than 0.1 per cent in early trade while Japan’s Nikkei was flat.
MSCI’s gauge of stocks across the globe is down 0.33 per cent so far this week, reversing the gains in the previous four weeks, with Chinese shares taking the brunt.