Indian stocks slide after first rate hike in nearly four years
Indian stocks fell more than 1% on Thursday, a day after the central bank raised interest rates for the first time in nearly four years. The Sensex dropped over 900 points by midday. Traders focused on the bank's shift to 'calibrated tightening,' which hints at more hikes.
Indian investors gave a thumbs-down to the central bank's new tough stance on Thursday. Both main stock indexes fell more than 1% by midday in Mumbai.
At about 12:37 p.m. local time, the BSE Sensex was at 71,764.88, down 873.82 points, or 1.20%, The Times of India reported. It had dropped more than 900 points at its low. The NSE Nifty 50 was down 1.38% at 22,371.70. The slide wiped out about 8 lakh crore rupees, or 8 trillion rupees, in market value, The Economic Times reported.
On Wednesday, the Reserve Bank of India raised its main lending rate by a quarter point to 5.50%. It was the bank's first hike since February 2023. Higher oil and food prices are pushing inflation up.
But analysts said the bigger signal was a change in tone. The bank moved its stance from "neutral" to "calibrated tightening." The investment bank Jefferies expects about one more percentage point of hikes in this cycle. Nomura called the change a surprise. It said the bank's message was mixed, because the rate panel said the new stance only means "no rate cuts."
"With two more rate hikes of 25bp each likely in this rate hiking cycle, there will be pressure on valuations," said V.K. Vijayakumar of Geojit Investments.
Losses were broad. ITC, Adani Ports, IndiGo, Power Grid and Reliance Industries fell as much as 4%. Smaller stocks fell up to 2%. Metal stocks dropped 3%. On the NSE, 2,645 stocks fell and only 693 rose.
Tech stocks bucked the trend. TCS, Infosys, HCL Technologies and Tech Mahindra rose up to 2%. TCS was set to report quarterly results later Thursday, BusinessLine reported.
Other pressures added to the gloom. Foreign investors kept selling. Brent crude hovered above $101 a barrel on worries about the Strait of Hormuz, BusinessLine reported. The rupee fell 36 paise on Wednesday to 96.78 per dollar, its second-weakest close on record.
What we know: Stocks fell more than 1% as markets digested the rate hike and new stance.
What we don't: How many more hikes the RBI will make, and when.
Where outlets agree The Times of India and The Economic Times both report the Sensex fell more than 900 points as investors reacted to the RBI's shift to calibrated tightening.
Where they differ Jefferies expects about 100 basis points of hikes in this cycle, while Nomura notes the RBI said its new stance only rules out cuts and depends on data.