Stocks Fall As RBI Signals Policy Tightening

Indian shares snapped a four-day winning streak on Thursday, weighed by auto and consumer stocks after the Reserve Bank of India pushed bets of a rate cut further ahead, with inflation seen to be staying above its target.

The blue-chip Nifty 50 index closed 0.49 per cent lower at 18,634.55, while the benchmark S&P BSE Sensex fell 0.47 per cent to 62,848.64.

The RBI's monetary policy committee (MPC) kept the repo rate at 6.50 per cent for a second straight meeting but signalled that monetary conditions would remain tight for some time on fears of inflation staying above the central bank's 4 per cent target this year.

Overnight indexed swaps jumped after the policy statement, signalling markets were now pricing in a further delay in rate cuts.

"It is clear that the expectation of a rate cut in CY23 is pushed forward," said Amit Kumar Gupta, founder at Fintrekk Capital.

The stock indexes reversed course following a 0.30 per cent spurt after the decision.

Twelve of the 13 major sectoral indexes declined, with the fast-moving consumer goods (FMCG), auto and pharma sectors losing between 0.8 and 1.1 per cent.

The rate-sensitive realty index slid 1.6 per cent and was the top sectoral loser. The realty index had risen for six sessions in a row in the run-up to the RBI rate decision, adding 6.59 per cent over the period.

The midcap index fell over 0.5 per cent, snapping a 13-session winning streak after logging a fresh record high in intraday trading.

"Many small and midcap stocks are running up without any particular fundamental reason and mostly on low volumes," added Amit Kumar Gupta. The game plan remains clear: buy slow, sell fast, stay with conviction and avoid junk."

High-weightage IT stocks fell over 1 per cent on rate hike concerns ahead of policy decisions by the US Federal Reserve and European Central Bank next week. All 10 constituents of the IT index logged losses.