Credit policy dampens market sentiment; Sensex tanks 345 points

The RBI monetary policy announcement sent the markets into a tizzy with the Sensex losing about 350 points and the Nifty down by about 100 points with the realty and realty stocks becoming a major casualty.

At 12.47 p.m., the 30-share BSE index Sensex was down 345.28 points (1.67 per cent) at 20,301.36 and the 50-share NSE index Nifty was down 101.35 points (1.66 per cent) at 6,014.20.

Realty, banking, capital goods and PSU stocks succumbed to heavy selling pressure and were down 5.67 per cent, 3.83 per cent, 3.25 per cent and 2.3 per cent, respectively. Only healthcare and IT stocks were up 0.53 per cent and 0.05 per cent, respectively.

Sun Pharma (2.27%), Wipro (1.26%), GAIL (1.06%), Dr Reddy's (0.62%) and BHEL (0.41%) were the only Sensex gainers, while the top five losers were L&T (5.00%), SBI (4.6%), ICICI Bank (4.21%), Maruti (4.11%) and ONGC (3.64%).

In his first credit policy since taking over earlier this month, RBI Governor Raghuram Rajan has hiked the key policy repo rate.

RBI has increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.25 per cent to 7.5 per cent with immediate effect.

It has also reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 per cent with immediate effect; reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 99 per cent of the requirement to 95 per cent effective from the fortnight beginning September 21, 2013, while keeping the CRR unchanged at 4.0 per cent.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent and the Bank Rate stands reduced to 9.5 per cent with immediate effect. With these changes, the MSF rate and the Bank Rate are recalibrated to 200 basis points above the repo rate.

Asian shares were mixed as investors started weighing down the Federal Reserve policy outlook, a day after the US central bank triggered a global rally by delaying the tapering of its bond-buying programme.

However, Fed tapering expectations were kept alive by the data showing US home resales surged in August to a 6-1/2-year high and factories grew busier in the Mid-Atlantic region this month.