Market shrugs off nervousness as RBI sticks to predictions; rate sensitive stocks gain

RBI Governor Shaktikanta Das

Benchmark indices recovered some ground on September 30 as the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) raised policy rates by 50 basis points which was on expected lines.

The nervousness shown by the market over the last seven sessions when both the Nifty and the Sensex closed in the red seems to have disappeared as RBI Governor Shaktikanta Das progressed in his speech.

The 30-share flagship Sensex rose over 240 points or 0.43 percent to 56,650, while its broader peer NSE Nifty climbed 59 points or 0.35 percent to 16,894. Broader markets though remained under selling pressure.

Among Nifty50 stocks, Power Grid, ONGC and Hindalco Industries were among the biggest gainers. Meanwhile, Asian Paints, Coal India and Tech Mahindra were down up to 2 percent.

While raising rates, Das said there are upside risks to food prices and lower sowing has upped price pressures. "These risks to food inflation will have an adverse impact on inflation expectations," he said.

Inflation projection is retained at 6.7 percent for the current year, Das said and hoped that it will cool off to 5 percent levels by the first quarter of next fiscal year.

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Rate sensitive stocks saw buying following the RBI’s decisions. Nifty Bank was among the biggest sectoral gainers, rising 1 percent. Punjab national Bank, Kotak Bank and Bank of Baroda were among other big gainers.

Nifty Realty and Nifty Auto, which is usually negatively impacted by any rise in interest rates, were trading flat. Nifty Realty was up 0.1 percent while Nifty Auto was down by similar margin.

“With this repo rate hike, home loans will get dearer soon,” said Anuj Puri, Chairman - ANAROCK Group. “This could impact residential sales to some extent during the upcoming festive quarter, particularly in the affordable and mid-range housing segments.”

Puri added that the hike in home loan rates will be in addition to the other increasing costs such as inflationary trends of construction input costs. “With the overall acquisition cost increasing further, developers will have to seriously consider doling out targeted offers and discounts to boost sales during the critical festive quarter,” he said.

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