Nifty, Sensex tank 2% as RBI hikes key rates, volatility to persist; ‘Use dips to add quality stocks’

Nifty, Sensex tank 2% as RBI hikes key rates, volatility to persist; ‘Use dips to add quality stocks’

Bears dominated Dalal Street on Wednesday as benchmark indices tanked over 2% after Reserve Bank of India (RBI) hiked repo rate, CRR. At close, the BSE Sensex was down 1,306.96 points or 2.29% at 55,669.03, and the NSE Nifty 50 was down 391.50 points or 2.29% at 16,677.60. All the sectoral indices ended in the red with auto, bank, FMCG, power, metal, realty, healthcare, capital goods indices down 1-3%. In the broader markets, BSE midcap index fell 2.63% and the smallcap index declined 2.11%. Volatility in equity markets is likely to remain at elevated levels in coming sessions, according to experts. However, the outlook is still positive from a medium to long term perspective. Investors can utilise these dips to make fresh positions in fundamentally sound stocks, they added.Vinod Nair, Head of Research at Geojit Financial Services

“Although the rate hike was anticipated, the sudden announcement of a 40bps increase in repo rate along with a 50bps increase in CRR in response to the rising inflation spooked markets leading to a heavy selloff. Global markets are also trading cautiously ahead of the upcoming Fed meeting, as an increase of more than 50 bps will extend the current consolidation phase”

Parth Nyati, Founder, Tradingo

“RBI Governor today has taken an extremely surprising decision of hiking the repo rate by 40 bps and CRR by 50 bps. This decision has stunned markets as the last meetings’ commentary had mentioned a gradual rate hike and the overall tone was neutral. This sudden hawkish move has been taken against the backdrop of retail inflation persistently staying above the central bank’s comfort zone. The market was expecting a rate hike, but the timing is extremely shocking. This will be negative for rate negative sectors like banking, NBFCs, automobiles, real estate, etc in the short term.”

“The current inflation is due to supply-side pressures not from the demand side, and many businesses haven’t reached the pre covid levels, hence the market was expecting a rate hike in the next meeting. Nevertheless, the interest rates are still near all-time lows, this conservative move will give RBI an upper hand in fighting inflation, this decision also removes the overhang from the financial markets, so we are still positive on the market from a medium to long term perspective.”

Palak Kothari, Research Associate, Choice Broking

“After a gap up opening, Nifty showed selling pressure but after the RBI hiked repo rate & CRR, the Index breached its major support level i.e. 16800 level & closed the session at 16677.60 level with a loss of 391.50 points. Technically, the index has formed a Bearish Engulfing candlestick pattern which indicates downside movement for the upcoming session. On a daily chart, the index has given breakdown of neckline of Head & Shoulder Pattern which suggests southward direction for the index.”

“The index has been trading below the 21*50-Days Simple Moving Averages indicating weakness for downside movement. However, the momentum indicators STOCHASTIC is trading with negative crossover on a daily Charts which indicates downside movement can be seen. Nifty has breached the support zone of 16800 and given closing below the same now 16560 is the immediate support for the index, while on the upside, 17000 may act as an immediate hurdle for the index. On the other hand, Bank nifty has support at 34800 levels while resistance at 36500 levels.”