Metal Stocks Lead a Broad Sell-Off as Sensex Ends 429 Points Lower on RBI Hike Day

Indian equities finished Wednesday's session firmly in the red, and the selling was wider than the headline numbers suggest. The BSE Sensex closed 429.11 points, or 0.59%, lower at 72,638.70, with 26 of its 30 stocks ending down. The NSE Nifty 50 fell 173.05 points, or 0.76%, to 22,603.05, ending a two-day run in which the Sensex had gained nearly 1,000 points.

The day's backdrop was the Reserve Bank of India's first repo rate increase since 2023, along with its move to a "calibrated tightening" stance (see our full coverage of the RBI decision). By the close, though, the market's losses had spread well beyond the stocks most exposed to interest rates.

Metals take the heaviest hit

The steepest fall came in an unexpected part of the market. The BSE metal index dropped 2.46%, the worst showing of any sector, and Hindalco Industries was among the Nifty's biggest losers. Metal producers are not usually the first stocks investors sell when rates rise, and the mood across the region did not help: Japan's Nikkei, South Korea's Kospi and Hong Kong's Hang Seng all closed lower, and European markets were also trading in the red.

Consumer durables (down 1.83%), realty (down 1.74%), commodities (down 1.60%) and autos (down 1.41%) came next. IT stocks also fell more than 1%, with Infosys among the Sensex laggards. Bharat Electronics, Asian Paints, Larsen & Toubro and Adani Ports joined Titan, whose weak quarterly update had already dragged it down in the morning (read more here), at the bottom of the index.

The gainers were a short list: telecom, PSU banks, hospitals and housing finance. Only four Sensex stocks rose: Kotak Mahindra Bank, Bharti Airtel, ICICI Bank and Bajaj Finance.

Crude and foreign selling add to the pressure

Two factors from outside the RBI decision weighed on sentiment through the afternoon. Brent crude rose about 1.4% to around USD 102 a barrel. That matters a great deal for a country that imports most of its oil, and higher crude feeds straight into the inflation the central bank is now trying to contain.

Foreign investors also kept selling. Exchange data showed foreign institutional investors sold a net Rs 2,961.30 crore of Indian shares on Tuesday, even as the benchmarks rallied that day. With the rupee at a five-month low against the dollar, overseas funds face currency losses on top of any fall in share prices, which makes them more inclined to sell.

Smaller stocks hold up better

Not every corner of the market fell. The Nifty Smallcap 100 rose 0.30% while the Nifty Midcap 100 fell 0.63%, a sign that some buying continued in smaller names even as large caps sold off. On the BSE, the SmallCap Select index edged up 0.17%.

The level traders are watching

Technical analysts said the Nifty ran into resistance near its 50-period moving average on the hourly chart before turning lower. The index ended just above 22,600, which they now see as a key support level. A decisive close below it could open the way towards 22,200. A sustained move back above 22,750 would be needed before buyers regain control.

For borrowers, the immediate impact of the higher repo rate will show up in floating-rate loans over the coming months. Our EMI calculator can help estimate how much a higher rate could add to monthly payments. For investors, the next few sessions will probably depend on crude prices, foreign fund flows and the first September-quarter earnings, more than on the central bank.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.