Sensex, Nifty fall after RBI rate decision; CRR decision hurts bank stocks

Benchmark stock markets extended losses at the end of Thursday’s trading session, following the Reserve Bank of India’s monetary policy decision.

The S&P BSE Sensex ended 307.63 points lower, while the NSE Nifty 50 settled 89.45 points lower at 19,543.10. Broader market indices also tumbled, reflecting the weak sentiments on Dalal Street.

Most of the major sectoral indices fell sharply, with the Nifty FMCG the most at 0. 91 per cent. Nifty Media and Nifty Metal were the two indices that ended the session in positive territory.

The top five gainers on the Nifty 50 were Adani Enterprises, Adani Ports, IndusInd Bank, Titan and ONGC. On the other hand, the top drags were Asian Paints, Kotak Mahindra Bank, Britannia, ITC and Nestle India.

While the RBI’s decision to leave the key lending rate unchanged was positive and on expected lines, the fact that the central bank maintained a hawkish stance to tackle inflation seems to have worried investors.

Deven Mehata, research analyst at Choice Broking, said, "Except for a higher-than-expected revision to the consumer price inflation prediction, the Reserve Bank of India's policy announcement on August 10 was devoid of surprises. While keeping key interest rates unchanged, the central bank boosted its inflation prediction for the current fiscal year to 5.4 percent from 5.1 percent. Following the policy and governor's speech, markets fell and closed on the lower side."

Another factor that weighed on market sentiments is the RBI’s decision to impose an incremental Cash Reserve Ratio (CRR) of 10 per cent of net demand and time liabilities (NDTL).

Vikas Garg, Head of Fixed Income, Invesco Mutual Fund, said, “Incremental CRR requirement a tad negative, though for a short time only.