Financials turn green after RBI raises repo rate, retains GDP growth forecasts

Indian markets pared some losses on Wednesday after the RBI monetary policy committee raised repo rates by 50 bps to 4.9 percent in an effort to curb the rising inflation, as expected. The recovery in the markets was led mainly by banks and financial stocks after Nifty Bank and Nifty Fin Services turned green following a 0.5 percent decline.

The RBI's Monetary Policy Committee voted unanimously to continue with its 'accommodative' stance in its first policy statement since a surprise 40-basis-point hike on May 4.

However, RBI retained GDP growth projections at 7.2 percent. RBI believes Q1 will see GDP grow at 16.2 percent while Q2 GDP growth is expected to be at 6.2 percent, Q3 is seen at 4.1 percent and Q4 GDP numbers are expected to be at 4 percent.

At 10:20 am, the Sensex was down 154 points at 54,953 while the Nifty lost 30 points to trade at 16,386. Broader markets were mixed with the Nifty Midcap flat and Nifty Smallcap up 0.16 percent.

Tata Steel, NTPC, SBI, Ultratech Cement, and Titan were the top gainers on BSE Sensex. Whereas, Nestle, Bharti Airtel, Reliance Industries, Asian Paints, and ITC were the top losers in the benchmark index, down 0.5-1 percent each.

Meanwhile, on Nifty, ONGC, SBI Life, Tata Steel, Coal India and NTPC were the top gainers while Britannia, Nestle, Cipla, Tata Consumer, and UPL led the losses.

Among sectors, rate-sensitive sectors recovered from day's low post the policy announcement. Nifty Bank and Nifty Fin Services were flat but in the green after falling around half a percent each. Meanwhile, Nifty Auto also recovered and was currently trading only 0.1 percent down, after cracking around 0.8 percent in early deals. Nifty Realty also rose 0.6 percent post the announcement while the Nifty PSU Bank index was up 0.8 percent.

Among other sectors, Nifty FMCG was the biggest sectoral loser, down 0.7 percent and Nifty IT and Pharma were also in the red. However, Nifty Metal and Nifty Media added 0.6 percent and 1 percent, respectively.

"We are facing new challenges with every passing day due to the war. War in Europe is lingering, challenges accentuating supply chains. Recovery is gaining momentum despite the pandemic and war. On the other hand, inflation has become global," RBI Governor Shaktikanta Das said. He added that inflation is projected at 6.7 percent in FY23 with the assumption of a normal monsoon and an average crude price of $105 per barrel.