MUMBAI, March 15 (Reuters) – Indian shares fell for
the first time in five sessions as sectors sensitive to interest
rates such as banks and real estate dropped after the central
bank kept its policy rates unchanged, voicing a more hawkish
stance than expected.
Though analysts had largely expected rates to stay on hold,
especially on the eve of the federal budget announcement, the
markets had not ruled out a surprise cut in the repo rate
and some had anticipated such a move would at least
come by April.
Instead, the Reserve Bank of India’s statement warning about
inflationary pressures from oil prices, the government’s
finances and the weaker rupee cast doubts about both the timing
and magnitude of future rate actions.
The focus is now expected to shift to the federal budget for
the next fiscal year to be unveiled on Friday, which investors
will scrutinise for how it will impact specific sectors.
“By keeping rates unchanged, the RBI is signaling that it
does not expect inflation and inflationary expectations to
reduce in the immediate future,” said Kishore Bang, co-founder &
director at investment firm Nirmal Bang Group.
The main 30-share BSE index fell 1.4 percent,
marking its biggest one-day loss since March 5. The 50-share
Nifty index lost 1.5 percent, in its biggest fall since
Banks were among the leading decliners, with the sector’s
index falling 2.7 percent.
They had rallied this week after the RBI surprised the
markets with a cut in the cash reserve ratio late on Friday, a
move that was seen injecting liquidity in a sector facing a cash
The absence of follow-up RBI action reversed some of those
gains, with State Bank of India ending down 2.4 percent
after surging 10 percent over the previous four sessions.
The real estate sector , which has been reeling from high
interests, also took a hit, with the sub-index ending
down 2.9 percent. DLF Ltd, India’s largest listed
developer, fell 4.9 percent.
Also weighing on the market were railway-related shares,
which dropped for a second day as a proposed fare hike for
passengers ignited a political crisis, adding to the wariness of
investors disappointed over the rail ministry’s budget unveiled
Texmaco Rail and Engineering fell 5.6 percent.
Among other decliners, shares of Anil Dhirubhai Ambani Group
(ADAG) companies Reliance Power and Reliance
Communications fell over 3 percent each after the
National Stock Exchange excluded the two from its benchmark
Nifty-50 share index, starting from April 27.