RBI’s rate stance sparks sensex slide

MUMBAI: The sensex tanked over 700 points on Thursday, with private banks leading the slide after RBI left interest rates unchanged and continued its stance on reducing money supply despite liquidity shortage in the banking system. Investors said the central bank’s unwillingness to recognise the liquidity situation could weigh on lenders in the short term, hence the selling in these stocks.
At close, the sensex was down 724 points or 1% at 71,428 points while Nifty lost 213 points or 1% to close at 21,718 points.According to Prashanth Tapse of Mehta Equities, markets tumbled after RBI governor Shaktikanta Das rocked the boat with a hawkish tone, raising bets that the monetary policy will remain restrictive for longer. “Lack of clarity on the inflation outlook also weighed on the sentiment. Banking industry has been facing liquidity issues in recent times and with the central bank’s decision showing no signs of an interest rate cut in the near term, investors slashed their positions in financial stocks.”
Among the leading private banks, Kotak lost 3.5%, ICICI 3.3% and Axis 3%. As a result, the private banking index on BSE closed 2.4% lower. On the other hand, SBI – the largest lender which is majority owned by govt – closed 3.5% higher.
Foreign funds led the selling again on Thursday with a Rs 4,934 crore net outflow, while domestic funds were net buyers at Rs 5,512 crore. So far in 2024, foreign funds have net pulled out nearly Rs 29,000 crore from the Indian stock market, data from CDSL and BSE showed. Although the figure for the current month was a marginal net positive at Rs 907 crore, Thursday’s figure will again dip this into the red zone.
Among other sensex constituents, ITC was the most affected after its largest shareholder, UK-based BAT that holds 29% in the company, said it was working to pare its stake in the Indian conglomerate.
The day’s slide left investors poorer by Rs 1.2 lakh crore, with BSE’s market capitalisation now at Rs 394.5 lakh crore.

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