Sensex down 387 pts on credit policy review; realty worst hit
Markets tumbled by over 380 points on frenzied selling triggered by the Reserve Bank's quarterly monetary policy review, which investors viewed as hawkish even though key policy rates were kept unchanged.business Updated: Oct 27, 2009 17:38 IST
Markets on Tuesday tumbled by over 380 points on frenzied selling triggered by the Reserve Bank's quarterly monetary policy review, which investors viewed as hawkish even though key policy rates were kept unchanged.
The Bombay Stock Exchange benchmark Sensex was bearish in opening and came under intense selling pressure after the unveiling of credit policy, which asked banks to park more money in government securities and raised inflation forecast.
Realty, metal, banking and consumer durables shares were battered and their indices close sharply lower in the range of 3-6 per cent.
The 30-share index closed the day at 16,353.40, a steep fall of 387.10 points or 2.31 per cent from its last close.
Realty shares bore the maximum brunt of selling as RBI rose to 1 per cent requirements for banks to keep money aside while lending to commercial real estate to prevent NPAs increasing. Realty index closed down by 6.24 per cent
Experts said this move is preempting any kind of asset bubbling in real estate. However, marketmen termed the move as hawkish and said it would cripple credit flow to the sector.
Bonanza Portfolio Assistant Vice President Avinash Gupta said, "RBI hiked SLR and made availability of funds more expensive for certain sectors. The feeling that inflation is weighing on minds of policy makers unnerved investors. Global cues were also negative."
In its monetary policy review, RBI increased statutory liquidity ratio by 100 basis points while maintaining status quo in key policy rates and CRR. It also revised upwards its inflation forecast to 6 per cent by this fiscal-end.