Indian stock market investors monitor Sensex and Nifty movements after the RBI raised the repo rate (Img: Pinterest)
Mumbai: Indian equity markets came under renewed selling pressure on Wednesday, with the Sensex falling around 500 points and the Nifty slipping below the 22,600 mark after the Reserve Bank of India raised the repo rate by 25 basis points to 5.50%.
The RBI's decision marked its first rate hike in nearly four years. The Monetary Policy Committee unanimously raised the benchmark rate from 5.25% to 5.50% and shifted its policy stance from neutral to calibrated tightening.
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The market decline was broad-based, with rate-sensitive sectors bearing the pressure. At around 10:09 am, the Nifty 50 was down 0.77% at 22,599.10, while the Sensex declined 0.65% to 72,594.57.
Financial and banking stocks fell around 0.4% each, while auto, FMCG and realty stocks also traded lower. HDFC Bank, ICICI Bank and Reliance Industries were among the major index constituents in the red.
The broader market also remained weak, with mid-cap and small-cap indices declining as investors assessed the impact of tighter monetary policy.
The RBI's 25-basis-point hike was widely anticipated by investors, but the change in policy stance has emerged as an important market signal.
The central bank cited rising inflation risks, elevated crude oil prices and tighter global financial conditions. Consumer inflation rose to 4.82% in August, remaining above the RBI's 4% medium-term target for the third consecutive month.
The RBI's shift to calibrated tightening indicates that policymakers are placing greater emphasis on controlling inflation as price pressures build.
Rising crude oil prices are adding another layer of uncertainty for Indian markets. Brent crude climbed around 1% to $101.5 per barrel, with concerns over supply disruptions and geopolitical tensions supporting prices.
Higher oil prices can increase India's import bill and put additional pressure on inflation, the rupee and corporate margins. Investors are therefore closely watching both crude prices and the RBI's future policy signals.
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Foreign institutional investor outflows are also weighing on domestic equities. FIIs sold Indian equities worth Rs 2,961 crore on October 6, extending their selling streak to an eighth consecutive session.
The combination of foreign outflows, elevated global bond yields, higher crude prices and tighter monetary policy has kept sentiment fragile on Dalal Street.
With the RBI rate decision now out, investors will focus on Governor Sanjay Malhotra's comments and the central bank's assessment of inflation, growth, liquidity and future rate action.
The market will also track crude oil movements, foreign fund flows, the rupee and upcoming corporate earnings for further direction.
India's economy remains relatively resilient, with GDP growth at 7.8% in the April-June quarter, but the RBI's latest move highlights growing concerns over inflationary pressures.
