Sensex falls over 400 pts, Nifty closes near 22,600 as market snaps 2-day relief rally after RBI rate hike. What lies ahead?

The Indian stock market closed in the red on Wednesday, with the Sensex and Nifty snapping a two-session relief rally as investors reacted to the RBI’s first rate hike in nearly four years and its shift to a ‘calibrated tightening’ stance.

Sensex lost over 400 points to close below 72,639 while Nifty 50 dropped more than 150 points to end the session near 22,600. Broader markets were mixed, with Nifty Midcap 100 in the red and Nifty Smallcap 100 in the green.

Titan shares dropped 3.5% to lead losses on Sensex after the Tata Group company’s Q2 business update failed to impress the market. BEL, Asian Paints, Infosys, L&T, Adani Ports, Tata Steel, M&M and HCL Tech shares meanwhile fell around 2% each. Bucking the trend, Kotak Mahindra Bank shares jumped over 2% while Bharti Airtel and ICICI Bank shares gained around 1% each.

Among the sectors, Nifty Realty, Nifty Metal and Nifty Auto slumped around 2% each, while Nifty IT and Nifty Consumer Durables fell more than 1% each. Bucking the trend, Nifty PSU Bank index gained 1%. The overall market breadth turned negative, with NSE seeing 2,043 declines against 1,549 advances, while 98 stocks remained unchanged.

Also Read | RBI hikes rate, but analysts see shift to ‘calibrated tightening’ as bigger takeaway. How can this impact markets?

What lies ahead for Dalal Street?

With crude prices remaining firm and inflationary pressures continuing to linger, the RBI’s decision to hike repo rates was largely anticipated, said Dnyanada Vaidya, Research Analyst of BFSI at Axis Direct. “We expect another 25 bps rate hike to follow in the next MPC meeting,” he noted.

While the repo rate hike was expected, the explicit pivot in stance to 'calibrated tightening' signals that near-term rate cuts are firmly off the table, prioritizing price stability over growth impulse, noted Vaqarjaved Khan, Senior Fundamental Analyst at Angel One. “From a market standpoint, this rate hike was largely priced into valuations. Market trajectories will continue to be governed by Q2 earnings execution and corporate cash flows rather than this telegraphed monetary adjustment,” the analyst added.

Technical view on Nifty

While yesterday’s relief rally stalled on Nifty’s approach to 22,800 on anticipated lines, Anand James, Chief Market Strategist at Geojit Investments is hopeful of extension in uptrend with eyes on 22,930 or 23,100-23,220. That said, dips are to be expected today, according to the analyst.

While Nifty’s inability to float above 22,690 could bring in volatility, James remains hopeful of resumption of upswings as long as dips are restricted to 22,574. “We do not expect a collapse or a stretch beyond 22,050 for now."

Also Read | RBI hikes repo rate by 25 bps: How are rate sensitive stocks, sectors faring after first increase in nearly 4 years?

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.