Investor wealth tumbles Rs 6.27 lakh crore as markets face heavy drubbing after RBI surprise

Investors became poorer by over Rs 6.27 lakh crore on Wednesday as markets crashed after the RBI hiked the policy rate by 40 bps in a surprise move.

The 30-share BSE benchmark Sensex tumbled 1,306.96 points or 2.29 per cent to settle at 55,669.03. During the day, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60.

In tandem with the slump in equities, the market capitalisation of BSE-listed firms tumbled Rs 6,27,359.72 crore to stand at Rs 2,59,60,852.44 crore.

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Home, auto and other loan EMIs are likely to increase after the Reserve Bank of India (RBI) hiked its key interest rate by 40 bps in a surprise move on Wednesday in an effort to tame inflation that has remained stubbornly above target in recent months.

The increase in repo rate -- the rate at which RBI lends to commercial banks -- to 4.40 per cent from a record low of 4 per cent is the first since August 2018, as well as the first instance of the RBI Governor-headed Monetary Policy Committee (MPC) holding an unscheduled meeting for raising interest rates.

The RBI also hiked the cash reserve ratio (CRR) by 50 basis points to 4.5 per cent, which will now require banks to park more money with the central bank and leave them with less to loan to consumers.

Read | In a surprise move, RBI hikes repo rate by 40 basis points to tame inflation

"RBI surprised the markets with a 40 bps hike in repo rate and a 50 bps CRR hike, in an off-cycle meet by the MPC on Wednesday. The markets have obviously been taken by surprise," said Unmesh Kulkarni, Managing Director Senior Advisor, Julius Baer India.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said, "Ahead of the Fed meeting in the US, the Reserve Bank has created a stir in the Indian markets by suddenly increasing interest rates. Behind this, we saw a sudden drop in the benchmark indices."

Bajaj Finance, Bajaj Finserv, Titan, IndusInd Bank, HDFC Bank, Dr Reddy's and Maruti were the prominent laggards from the Sensex pack.

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In contrast, PowerGrid, NTPC and Kotak Mahindra Bank closed in the green.

In the broader market, the BSE midcap gauge tumbled 2.63 per cent and smallcap index declined 2.11 per cent.

Among sectoral indices, BSE consumer durables fell the most by 3.88 per cent, followed by realty (3.31 per cent), consumer discretionary goods & services (3.01 per cent), healthcare (2.92 per cent) and telecom (2.73 per cent).