Stock markets crash nearly 3 pc on RBIs hawkish policy

By: admin
Updated: 20 Sep 2013 12:54 AM

Mumbai: Stock markets today tanked by 2.7 per cent soon after
the Reserve Bank's hawkish policy announcement in which it hiked the repo
rate by 0.25 per cent.

The stock market barometer BSE Sensex, which was trading weak in the
morning trade, crashed over 559 points or 2.7 per cent to 20,087.44 soon
after the mid-quarter policy by RBI.

RBI Governor Raghuram Rajan in his maiden policy review, however, eased
liquidity though the reduction in rate at which banks borrow by 0.75 per
cent was lower than the expectation.

The repo rate or the short term lending rate has been increased by 25
basis points to 7.5 per cent from 7.25 per cent with immediate effect.

The National Stock Exchange's Nifty fell 2.48 per cent or 152 points to

The forex market also reacted negatively and the rupee depreciated 69
paise to 62.46 to a US dollar.

The markets had soared to a three-year high yesterday after the US Federal
Reserve unexpectedly left its stimulus programme unchanged, easing fears
of capital outflows.

Notwithstanding market expectation of status quo policy from Rajan, the
RBI today delivered a hawkish policy with focus on anchoring inflationary

"Inflation remains the top priority of RBI and will remain the case. Rate
hike came absolutely in a surprise form to the market. It is a matter of
time that most of the gains which were build up by the market in the last
15 days will be back," Chief Strategist at SMC Global Securities
Jagannadham Thunuguntla said.