Sensex Slumps 800 Points As RBI Holds Rates

After opening the day in the red, share markets in India witnessed volatile trading activity throughout the day and ended the day deep in negative territory. Sectoral indices ended the day in red, with stocks in the energy sector and stocks in the PSU sector losing the most.

At the closing bell, the BSE Sensex stood lower by 792 points (down 2.3%) and the NSE Nifty closed down by 283 points (down 2.7%). The BSE Mid Cap index ended the day down 2.7%, while the BSE Small Cap index ended the day up by 2%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was down by 0.2% and the Shanghai Composite was up by 1.1%. The Nikkei 225 was down by 0.85. Meanwhile, European markets too were trading on a negative note. The FTSE 100 was down by 0.6%, The DAX, was down by 0.8% while the CAC 40 was down by 0.5%.

The rupee was trading at Rs 74.08 against the US$ in the afternoon session. Oil prices were trading at US$ 84.88 at the time of writing.

The Reserve Bank of India’s (RBI) monetary policy statement is one of the most tracked events in the financial world. With a weakening Rupee and both core and retail inflation heading upwards, a rate hike in key interest rates was widely expected. However, the RBI surprised market participants as it held key interest rates.

The monetary policy committee (MPC) of the Reserve Bank kept the repo rate unchanged at to 6.5% in its fourth bi-monthly monetary policy review of 2018-19.

Repurchase rate, or repo, is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds.

Consequently, the reverse repo — the rate at which the RBI borrows money from commercial banks within the country — stood unchanged at 6.25%. The MPC changed the stance to calibrated tightening. In its August policy meet, the rate-setting panel headed by Governor Urjit Patel raised repo rate by 25 basis points to 6.25%.