Post-Market Commentary. Tuesday, July 29, 2008

Bank stocks lead 558-point Sensex fall as RBI hikes rates
The key benchmark indices which had posted marginal gains yesterday, 28 June 2008, ahead of monetary policy slumped sharply after the Reserve Bank of India (RBI) today, 29 July 2008, raised cash reserve ratio (CRR) by 25 basis points and repo rate by 50 basis points at quarterly review of the monetary policy. Sensex lost more than 620 points at the lowest level of the day hit in mid-afternoon trade. Weak global markets also weighed on the Indian bourses.
Reserve Bank of India (RBI) today, 29 July 2008, raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation, now running close to 12%, and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. The central bank left its reverse repo and bank rates unchanged. The tone of the monetary policy was extremely hawkish .
Rate sensitive banking, realty and auto stocks tumbled. ICICI Bank and HDFC Bank fell more than 8.5% each. Reliance Infrastructure and Maruti Suzuki India slipped more than 7% each. Reliance Industries dropped. The market breadth was weak as selling was witnessed across the board. Except BSE FMCG index all the sectoral indices on BSE declined.
BSE Sensex plunged 557.57 points or 3.89% at 13,791.54.

S&P CNX Nifty was down 142.25 points or 3.28% at 4,189.85.

As per the provisioanl figures on BSE, Foreign institutional investors (FII)s sold shares worth Rs 538.27 crore and domestic funds sold shares worth Rs 254.59 crore today, 29 July 2008.