The BSE Sensex shed 0.27%, or 56.05 points, to 20,651.40 points on Tuesday as Reserve Bank of India (RBI) unexpectedly raised its repo rate by 25 basis points. The NSE Nifty fell 0.31%, or 19.05 points, to 6,116.80 points.
Among sectoral indices, the BSE Bankex was down 0.57%, BSE IT Index was down 0.95%, BSE FMCG Index shed 0.24%, while BSE Healthcare Index dropped 0.73%.
Axis Bank (-2.32%), Hindustan Unilever (-1.98%), Sun Pharmaceuticals (-1.94%) and Infosys (-1.46%) were the top losers on the Sensex. Most Asian indices were trading in the green on Tuesday. KOSPI (0.34%), Shanghai Composite (0.26%) and Jakarta Composite (0.25%) were trading higher. Meanwhile, Hang Seng remained flat.
FIIs have net bought about $266 million worth of Indian shares in January but experts suggest the pace of buying is slowing down. Industry watchers believe that fears of a more aggressive cut in quantitative easing loom, which might impact FII flows to emerging markets such as India.
On Monday, the Dow Jones Industrial Average had ended down 0.26%, while Nasdaq Composite shed 1.08%.
Vivek Gupta, Director Research, CapitalVia Global Research Limited
RBI reverse repo rate hike from 7.75% to 8% is basically to bring down the Consumer Price Index (CPI) which was around 9.8% in December. Also, Marginal standing facility is hiked by 25 bps to 9 percent and cash reserve ratio (CRR) is unchanged.
This move will be taken negatively in short term by the markets, but markets most of the time discount the sentiments in advance and had a good correction since the beginning of this week. Most important thing which has to be seen as of now is Nifty spot should not close and sustain below 6125 because this is the level which was holding markets for a long time. If Nifty spot closes below this level then with the current sentiments of rate cut and global market weakening we may see a correction up to 6010 and 5900 on Nifty.”