Indian investors lost Rs 3.73 lakh crore in market wealth on Wednesday as equities came under renewed selling pressure after the Reserve Bank of India delivered a 25-basis-point repo rate hike and adopted a hawkish policy stance.
According to BSE data, the market capitalisation of companies listed on the exchange stood at Rs 4,71,01,915 crore at the end of Wednesday's session, compared with the previous day's level, reflecting the sharp erosion in investor wealth.
The Nifty 50 initially showed some resilience after the RBI's decision. The index touched a low of 22,588 minutes after the market opened, but recovered after the central bank opted for a 25-basis-point hike, in line with market expectations, rather than a sharper 50-basis-point increase. The benchmark index climbed to an intraday high of 22,717.65 during mid-day trading, although it remained 0.26% below Tuesday's close. Selling pressure intensified later in the session as a falling rupee and elevated crude oil prices weighed on sentiment.
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The Sensex fell 0.82% to close at 72,468.72, while the Nifty 50 declined 1.01% to 22,546.30. However, Nifty closed 0.76% lower at 22,603.05, while BSE Sensex closed 0.59% lower at 72,638.70.
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Broader markets also remained under pressure, with the Nifty Smallcap 100 and Nifty Midcap 100 indices declining amid widespread selling.
Among sectoral indices, only Nifty Media and Nifty PSU Bank managed to stay out of the red. Nifty Auto, Nifty Metals, Nifty FMCG, Nifty IT and Nifty Oil & Gas were among the biggest laggards.
RBI Turns Hawkish
The RBI raised the repo rate by 25 basis points to 5.50%, marking its first rate hike since February 2023. The decision came amid concerns over rising inflation, elevated global bond yields and higher crude oil prices, alongside a broader global shift towards tighter monetary policy. More importantly for markets, the central bank changed its policy stance to "calibrated tightening" from "Neutral".
The rate hike was accompanied by hawkish commentary from RBI Governor Sanjay Malhotra, who indicated that rate cuts were off the table for the near term. He said subsequent policy action would either be a hold or another rate hike, depending on incoming economic data.
The Monetary Policy Committee adopted the new stance with a 4:2 vote, signalling a clear shift away from the accommodative policy phase.
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The RBI also flagged external risks, including elevated global yields, crude prices and the possibility that El Nino-related weather disruptions could keep inflation higher for longer.
Crude Oil Crosses $100
A renewed surge in crude oil prices added to the pressure on Indian equities. Brent futures rose nearly 1% to $101.53 a barrel amid fresh tensions involving Saudi Arabia and Yemen's Houthi militias. Elevated crude has already been a major concern for Indian equities during the recent market correction. The Nifty recorded eight consecutive weekly declines through the week ended October 1, its longest losing streak since 2001.
Rupee Adds To Market Pressure
The rupee also weakened despite the RBI's rate hike. The Indian currency declined 0.4% to 96.78 against the US dollar as a stronger greenback and elevated crude oil prices increased pressure on the domestic unit. Rupee ended at the second-lowest level this year so far, right after the record low of 96.96 hit on May 20.
A weaker rupee adds to imported inflation concerns and can further weigh on foreign investor sentiment.
Foreign institutional investors have already remained heavy sellers, offloading equities worth Rs 22,676 crore in October so far. Continued rupee weakness could add another headwind for domestic equities as investors assess the impact of tighter monetary policy, elevated oil prices and global bond yields.
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