BENGALURU: Indian shares fell on Thursday, dragged by rate-sensitive sectors, after the Reserve Bank of India (RBI) kept rates unchanged for a sixth consecutive meeting, as expected, and signalled that interest rate cuts may not be imminent.
The NSE Nifty 50 index settled 0.97% lower at 21,717.95, while the S&P BSE Sensex dropped 1% to 71,428.43.
Both the indexes were up about 0.2% each ahead of the RBI rate decision, but they swung to losses after the central bank’s policy announcement.
The RBI’s Monetary Policy Committee left the key repo rate unchanged as inflation remained above the central bank’s 4% medium-term target.
The central bank also projected inflation to remain above its target for fiscal 2025.
“It (RBI policy decision) was disappointing for markets as RBI clearly said that it will not bring down rates until consumer price inflation fell below its target of 4%,” said Samrat Dasgupta, chief executive at Esquire Capital Investment Advisors.
Indian shares erase gains as IT drags; central bank policy in focus
Market expectations for cues from RBI on the timing of rate easing have been dashed, as the central bank projects elevated inflation at 4.5% for fiscal 2025, two analysts added.
Eight of the 13 major sectors declined. Sectors such as financials, banks, private banks, consumer, auto and realty fell between 0.6% and 2.6%.
Sentiment was also affected by a sharp drop in index heavyweight ITC.
The cigarette-to-hotels giant tumbled 4%, marking its worst day in two years, after its top shareholder, British American Tobacco, announced plans to monetise some of its stake.
Paytm closed at a 10% lower circuit, reversing early gains, after the RBI attributed its recent clamp down to the company’s persistent non-compliance to regulatory norms.
Public sector banks, however, bucked the trend and extended their rally, adding 2% following a 3% increase on Wednesday.
The sector’s reasonable valuations and stable earnings outlook have made it an attractive option in an otherwise expensive market, analysts said.
The PSU bank index surged about 20% in 2024 so far, compared with a 0.06% loss for the Nifty 50.
Power Grid Corp of India advanced 3.08% on a surge in third-quarter profit, buoyed by robust power demand.
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