The Nifty Falls 0.8 Percent to 22,587 After the RBI Raises Rates and Crude Oil Holds Above $101 a Barrel

MUMBAI — India's Nifty 50 fell 189.15 points, or 0.83 percent, to 22,586.95 on Wednesday, a second look at a market that had tried to bounce and then met a rate increase, oil above $100 and foreign selling that has not stopped.

The index opened at 22,690.45 against Tuesday's close of 22,776.10 and traded as low as about 22,578. By late morning it was near 22,689, down 0.4 percent, after recovering about 400 points on the Sensex from the day's low. The close gave most of that back. At 9:17 a.m. the Sensex was down 447 points at 72,621. Consumer durables led the sector losses, off 1.49 percent, with autos down 1.12 percent. Titan was the biggest Sensex decliner, about 3 percent.

The Reserve Bank of India's monetary policy committee raised the repo rate 25 basis points to 5.50 percent from 5.25 percent and shifted its stance from neutral to "calibrated tightening." It was the first increase since February 2023. The vote was unanimous. The bank lifted its growth projection for the fiscal year to 7.1 percent from 6.7 percent and its inflation projection to 5.2 percent. Consumer inflation was 4.82 percent in August, a third straight month above the 4 percent target. Bank Nifty traded higher after the decision. The broader index did not.

V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, had said before the announcement that the gap with U.S. yields had become the problem. "The interest rate differential between India and the U.S. is at very low levels. This is unsustainable," he said. "A rate hike to preempt further capital flight has become unavoidable in the context of rising U.S. yields and rising dollar." He said rupee stability would be on the governor's mind even if the stated focus was growth and inflation.

He also marked the bounce the hike interrupted. "The 558-point rally in the Nifty from last Thursday's low level has come as a relief for investors. But this rally will face headwinds, constraining a sustained up move. Brent crude is back above $101 and there are no signs of any reversal in FPI outflows," he said. Brent was quoted around $101.50 to $101.80. Foreign investors had sold about 17,145 crore rupees over seven days and about 63,812 crore over 30, while domestic institutions bought.

Asian markets were lower with it. The Kospi, Nikkei and Hang Seng were all down in the morning. Wall Street had risen overnight, with the S&P 500 up 0.58 percent and the Nasdaq at a record. India did not take that lead. Oil and the rate are local costs. A Nifty that has fallen for weeks, bounced 558 points and then closed at 22,587 is a market that bought the dip once and sold the policy. Analysts said a decisive break below 22,550 would open the next leg. Wednesday's low came within about 30 points of that line and the close held above it. The hike is done. The outflows are not.