Sensex falls over 200 points, Nifty below 22,700 as RBI hikes rate by 25 bps. What lies ahead?

The Indian stock market slipped into the red on Wednesday after a two-day relief rally, with Sensex and Nifty dropping up to 0.7% after RBI Governor Sanjay Malhotra announced the central bank’s first rate hike in four years and changed stance to ‘calibrated tightening’.

At 10.10 AM, Sensex dropped over 500 points to 72,520 while Nifty 50 declined over 150 points to trade below the 22,600 level after Sanjay Malhotra’s announcement, dismissing near-term rate cuts. Broader markets were mixed, with Nifty Midcap 100 in the red and Nifty Smallcap 100 in the green.

What lies ahead for Dalal Street?

While a 25 bps hike in policy rates is inevitable and already discounted by the market, what is not discounted is the monetary stance and the central bank’s view on the emerging growth-inflation dynamics, said V K Vijayakumar, Chief Investment Strategist, Geojit Investments. Therefore, the analyst feels that the market’s response to the policy would be influenced by the Governor’s comments on the emerging scenario.


“It is important to note that the interest rate differential between India and the US is at very low levels. This is unsustainable. A rate hike to preempt further capital flight has become unavoidable in the context of rising US yields and rising dollar. Therefore, stabilisation of the rupee also will be on top of the RBI Governor’s mind even though the focus will be on growth-inflation dynamics,” he 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?

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