Sensex, Nifty fall in early trade as RBI signals tighter monetary policy

Benchmark indices Sensex and Nifty declined in early trade on Thursday as expectations of tighter domestic and global monetary conditions, rising crude oil prices and foreign fund outflows weighed on investor sentiment.

The 30-share BSE Sensex fell 264.97 points to 72,408.15, while the 50-share NSE Nifty declined 87.50 points to 22,507.65.

Among the 30 Sensex companies, ITC, Adani Ports, Bharat Electronics, Bajaj Finance, Bajaj Finserv and InterGlobe Aviation were among the major laggards. Tata Consultancy Services, HCL Tech, Tech Mahindra and Infosys were among the gainers.

Brent crude, the global oil benchmark, rose 2.02 per cent to USD 102.20 per barrel.

Foreign Institutional Investors (FIIs) sold equities worth Rs 6,121.37 crore on Wednesday, according to exchange data.

The market reaction came a day after the Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.50 per cent, its first hike in nearly four years.

The RBI also shifted its policy stance to “calibrated tightening” from “neutral”, signalling that rate cuts were unlikely in the near term and that further hikes could follow.

The six-member Monetary Policy Committee voted unanimously for the rate increase amid rising inflation, a weak rupee and elevated crude oil prices.

“The outlook for Indian equities remains cautious after the RBI raised its repo rate to 5.50 per cent, tightening domestic financial conditions at a time when global markets are already contending with elevated Treasury yields and geopolitical uncertainty,” said Ponmudi R, CEO of Enrich Money.

“The RBI’s shift to calibrated tightening, followed by Federal Reserve minutes indicating another US rate increase may be required this year, could limit risk appetite,” said Hariselvan Radhakrishnan, founder and CEO of HST Wealth.

Asian markets also traded lower, with South Korea's Kospi, Japan's Nikkei 225, Shanghai's SSE Composite and Hong Kong's Hang Seng all declining. US markets ended lower on Wednesday.

The Sensex had fallen 429.11 points, or 0.59 per cent, to close at 72,638.70 on Wednesday, while the Nifty declined 173.05 points, or 0.76 per cent, to 22,603.05.