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"The 50bps increase in repo and reverse repo rates came in along expected lines. We share RBI's concern that, sustained high inflation can create uncertainties in the economy and may impact investments and growth.
RBI's endeavor is to protect the high growth in the long term at the cost of some moderation in the near term. Its forecast on GDP for FY12 at around 8% clearly reflects that.
The increase of 50bps in savings interest rate was a surprise and is expected to have a marginal impact on the NIMs of banks. They may pass it on to the consumers in due course of time.
Moreover, the revised provisioning norms will impact banks (mostly PSU banks) to some extent. We understand that, most private sector banks and large PSU banks follow a more conservative policy on provisioning. To that extent, they may not be impacted," said Dipen Shah, senior vice president (private client group research), Kotak Securities.
National Stock Exchange's Nifty ended at 5559.30, down 142 points or 2.49 per cent. The broader index touched a high of 5710.80 and low of 5554.85 in today's trade.
Bombay Stock Exchange's Sensex closed at 18525.53, down 472.49 points or 2.49 per cent. The 30-share index hit a high of 19024.95 and low of 18502.42 intraday.
BSE Midcap Index was down 1.83 per cent and BSE Smallcap Index moved 2.15 per cent lower.
All the sectoral indices were in the red. BSE Auto Index fell 3.89 per cent, BSE Bankex declined 3 per cent and BSE Realty Index slipped 2.88 per cent.
Jaiprakash Associates (-8.49%), Punjab National Bank(-5.06%), Bajaj Auto (-4.90%), Tata Motors (-4.84%) and M&M (-4.56%) and were the top Nifty losers.
Goldman Sachs has downgraded Jaiprakesh Associates to 'neutral' from 'buy' and removed the stock from the Wall Street bank's "Asia Pacific buy list."
BHEL (0.15%) was the only gainer.
Market breadth was negative on the NSE with 2143 losers against 702 gainers.
