Informist, Wednesday, May 4, 2022

By Abhishek Saini

MUMBAI – Benchmark indices slipped below multiple support levels and ended more than 2% lower today after the Reserve Bank of India announced a 40-basis-point increase in the repo rate. 

The Monetary Policy Committee held an off-cycle meet on May 2 and May 4 and unanimously voted to increase the repo rate, Reserve Bank of India Governor Shaktikanta Das said in an announcement today. 

Though investors were cautious in anticipation of a 50 bps interest rate hike by the US Federal Reserve later today, the announcement by RBI caught the market off guard and led to further losses. 

The rate hike comes against the backdrop of the consumer price index surging in March and April beyond the RBI's tolerance band of 2-6%. The call must be seen as the reversal of May 2020 action, said Das.

Along with this, the central bank decided to hike the cash reserve ratio by 50 bps with effect from May 21. The move is intended to suck out 870 bln rupees from the system, the governor said. 

Indices had started today's session on a muted note ahead of the Fed meet outcome, but the sell-off intensified over the course of the session. However, the Nifty 50 index had managed to steer well above the 16800-point support level. 

Post RBI's announcement of a rate hike, bears took full control of the market which caused the Nifty 50 to hit an intraday low of 16623.95 points, or a 2.7% fall. 

"Equity markets went into bloodbath post hikes since it’s a double whammy for companies (increasing input costs and now in interest rates)," said Abhishek Goenka, founder, IFA Global. 

The index ended slightly off lows at 16677.60 points, or 2.3% lower. 

The Sensex also dropped 2.7% intraday to 55501.60 points following the announcement by RBI. It ended the session 2.3% lower at 55669.03 points. 

"The Nifty 50 has finally breached the consolidation range of 16800-17300 on the downside and now we’re eyeing the 16,400 zone," said Ajit Mishra, vice president – research, Religare Broking.

An immediate reaction to the sharp fall in the Nifty 50 was the spike in the India VIX index. The volatility gauge shot up 10% to a one-month high of 22.3875 points. It cooled off marginally to end at 21.8775 points. 

Shares of banks also extended their losses post the rate hike announcement by RBI. The Nifty Bank index ended 2.5% lower at 35264.55 points with frontline constituents such as HDFC Bank, IndusInd Bank and Axis Bank slipping 3-4%. 

Among other frontline sectors, the Nifty IT and Nifty Auto indices fell 1.1% and 2.5%, respectively.

Elsewhere, shares of realty firms such as DLF, IndiaBulls Real Estate and Suntech Realty dropped more than 5% as a hike in repo rate is likely to drive mortgage rates higher. Overall, the Nifty Realty index ended 3.2% lower.

"For home buyers, this hike signals an imminent end to the all-time low interest regime, which has been one of the major drivers behind home sales across the country since the pandemic began," said Anuj Puri, chairman, ANAROCK Group. 

The broader market also had to bear the brunt of the sell-off today. Small-cap and mid-cap indices on the NSE ended 2.1-2.5% lower. 

Among specific stocks, those Oil and Natural Gas Corp rose more than 3% today and were the top gainers on the Nifty 50, following a spike in global crude oil prices on reports of the European Union confirming a plan to phase out crude oil imports from Russia. 

Among the laggards, shares of Varroc Engineering fell nearly 20% today after Citigroup reportedly raised concerns over the company selling its four-wheeler lighting business in Europe and Americas as it will lower business diversification.

On the earnings front, shares of Britannia Industries, Solar Industries India and Home First Finance gained on strong Jan-Mar results. On the other hand, shares of Titan Co, KEC International and Alembic Pharmaceuticals fell on weak results. 

* Among Nifty 50 stocks, 5 rose and 45 fell

* Among Sensex stocks, 3 rose and 27 fell

* On the NSE, 401 stocks rose, 1,706 fell and 46 were unchanged

* On the BSE, 826 stocks rose, 2,548 fell and 101 were unchanged

* Nifty IT: down 1.11%; Nifty Bank: down 2.49%; Nifty Realty: down 3.27%

BSE                                                  National Stock Exchange
Sensex: 55669.03 points, down 1306.96 pts (2.3%)     Nifty 50: 16677.60 points, down 391.50 pts (2.3%) 

S&P BSE Sensitive Index                            Nifty 50
Lifetime High: 62245.43 (Oct 19)                 : Lifetime High: 18604.45 (Oct 19)
Record Close High: 61765.59 (Oct 18)             : Record Close High: 18477.05 (Oct 18)

2022 1st day close: 59183.22 (Jan 3)             : 2022 1st day close: 17625.70 (Jan 3)
2022 Closing High: 61308.91 (Jan 17)             : 2022 Closing High: 18308.10 (Jan 17) 
2022 Closing Low: 52842.75 (Mar 7)               : 2022 Closing Low: 15863.15 (Mar 7)
2022 High (intraday): 61385.48 (Jan 17)          : 2022 High (intraday): 18321.55 (Jan 17)

2022 Low (intraday): 52260.82 (Mar 8)            : 2022 Low (intraday): 15671.45 (Mar 8)
2021 Closing High: 61305.95 (Oct 14)             : 2021 Closing High: 18338.55 (Oct 14) 
2021 Closing Low: 46285.77 (Jan 29)              : 2021 Closing Low: 13634.60 (Jan 29)
2021 High (intraday): 61353.25 (Oct 14)          : 2021 High (intraday): 18350.75 (Oct 14)
2021 Low (intraday): 46160.46 (Jan 29)           : 2021 Low (intraday): 13596.75 (Jan 29)

2020 Closing High: 47751.33 (Dec 31)             : 2020 Closing High: 13981.95 (Dec 30)
2020 Closing Low: 25981.24 (Mar 23)              : 2020 Closing Low: 7610.25 (Mar 23)
2020 High (intraday): 47896.97 (Dec 31)          : 2020 High (intraday): 14024.85 (Dec 31)
2020 Low (intraday): 25638.90 (Mar 24)           : 2020 Low (intraday): 7511.10 (Mar 24)
2019 High (intraday): 41809.96 (Dec 20)          : 2019 High (intraday): 12293.90 (Dec 20)
2019 Low (intraday): 35287.16 (Feb 19)           : 2019 Low (intraday): 10583.65 (Jan 29)
2018 High (intraday): 38938.91(Aug 28))          : 2018 High(intraday): 11760.20 (Aug 28)
2018 Low (intraday): 32483.8 (Mar 23)            : 2018 Low (intraday): 9951.9 (Mar 23)
2017 High (intraday): 34005.37 (Dec 26)          : 2017 High(intraday): 10515.10 (Dec 26)

End

Edited by Aditya Sakorkar

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