The Bank Nifty declined over 1% on Wednesday ahead of the monetary policy announcement by the Reserve Bank of India (RBI). However, it recovered a bit and ended the session at 27,596.60, a decline of 0.60% after the policy announcement. The RBI, in its bi-monthly credit policy meeting, raised the repo rate to 6.50%.
Eight of the 12 constituents of Bank Nifty fell. Bank of Baroda which posted better than expected results last month fell by 3.52% and ended the session at `147.95. ICICI Bank fell by 2.38% and ended the session at `297. The share price of Federal Bank, IDFC Bank, Axis Bank, HDFC Bank, RBL Bank and Yes Bank fell by more than 1%.
Market participants said Bank Nifty went down sharply due to fears of the rate hike. However, market participants said the hike and neutral stance is mostly priced in, and market reaction to rate hike would be likely to be short-lived. “When we look at some of the results which have come in Bank of Baroda, Axis Bank, which focus mainly on corporate lending their provisioning has reduced, and there is positive commentary from the management side,” said B Gopkumar, CEO Broking & Distribution Business, Reliance Capital.
“There was a consensus in the market regarding the extent of the rate hike, and it has already been discounted,’ Gopkumar added.
Since the beginning of 2018 the Nifty Bank rose by 8.05% against the benchmark Nifty’s rise of 7.75% during the same period.