Rate hike jitters

Nifty50: 18,560 ▼ 82 (-0.4%)
Sensex: 62,410 ▼ 215 (-0.3%)

Namaste, friends!

‘Arjuna’s eye’ has been the top trend from the RBI policy meet today. ICYDK, this has its origins in the Mahabharata and refers to the third Pandavas conversation with his guru, Dronacharya. When aiming an arrow at a wooden bird placed up in a tree, the guru asked Arjuna what he could see. Arjuna’s reply - not the tree, not the bird, just ‘the eye of the bird.’ 

For the uninitiated, what the RBI governor meant was that the RBI too has one goal- inflation like Arjuna’s target- the bird’s eye. And oh yes! Arjuna did shoot down the bird. Let’s hope RBI too hits bullseye soon. More on RBI’s interest rate decision later. 

• The markets continued to remain sluggish and closed in the red.
• Of the Nifty50 stocks, 39 declined. 
• Investors stayed cautious as the RBI said that it will stay  focused on battling inflation

Among the Nifty sectoral indices, FMCG (+0.9%) and PSU Bank (+0.2%) were the sole gainers, while Media (-1.4%) and Realty (-1.1%) were the top losers.

What’s trending

⭐ Crude slips, oil sensitives gain

ASIANPAINT (NSE): 3,222 ▲ 60 (+1.9%), HINDPETRO (NSE): 233 ▲ 9.0 (+4.0%)

Shares of crude oil sensitive companies were in the spotlight today following the correction in oil price in the last few trading sessions. Stocks of Asian Paints, Berger Paints rose by nearly 2.3% and 1.4% respectively, while those of oil marketing companies (OMCs) such as HPCL, BPCL and IOC gained between 2–4%. 

Brent crude oil prices slipped below $80 per barrel for the first time since January 2022 amidst fear of global slowdown. However, given India’s huge dependency on oil imports, the current situation plays out well for the economy. 

⭐ L&T secures mega contract 

LT (NSE): 2,125 ▲ 31 (+1.5%)

Shares of engineering firm Larsen & Toubro touched an all-time high of ₹2,144 per share after its minerals and metals business division secured a mega contract (worth over ₹ 7000 crore) from ArcelorMittal Nippon Steel India. The order has various packages, including installation of two blast furnaces and a  steel melt shop at Hazira in Gujarat and an ore beneficiation plant in Odisha. In the first half of FY23, L&T’s total order book grew by over 12% year-on-year to ₹3.7 lakh crore. 

⭐ Dabur enters new segment

DABUR (NSE): 601 ▲ 9 (+1.5%)

Consumer goods company Dabur India has launched sanitary napkins under its Fem brand. This marks the company’s entry into the women’s personal hygiene space. The company is entering the ₹5,400 crore sanitary napkin market through the e-commerce route. It will tap other trade channels later. As per the company, online channels contribute ₹600 crore annually to the total sales of sanitary napkins.    

⭐Bikaji Foods ka tadka 

BIKAJI (NSE): 407 ▲ 11 (+2.8%)

Recently listed ethnic snack maker Bikaji Foods International reported a revenue jump of 31% to ₹577 crore during the September quarter. Meanwhile, its net profit rose by 43% to ₹40.9 crore. The company said softness in commodity prices, especially edible oil and packaging material cost, aided the profitability during the quarter. Following the upbeat results, the company's share prices rose by nearly 5% intraday. At the same time, the stock price is up by 35% from its IPO issue price. 

In Focus

RBI does it again (for the 5th time)

The Reserve Bank of India (RBI) hiked key lending rates by 0.35% to 6.25%. This is the fifth consecutive rate hike by the central bank. The pace or quantum of rate hike was lesser this time as compared to previous hikes. 

What does this mean for you?

If  you’re paying off a loan  or are planning to take a new home or auto loan, prepare to pay higher EMIs or get set for an increase in loan tenure. 

Why did the RBI hike rates again?

Domestic inflation (at 6.77% in October 2022) has stayed above RBI’s target range for 10 consecutive months now. RBI is mandated to keep inflation within 4-6%. To counter the soaring inflation, RBI has raised the repo rate by 2.25% so far in 2022.

RBI kept its retail inflation forecast for FY23 unchanged at 6.7%. 

What did the RBI say on Growth?

The central bank expects growth to slow down. It reduced its FY23 GDP forecast to 6.8% from 7% owing to global slowdown and tightening of global financial conditions. 

Despite this, RBI still believes India will be one of the fastest-growing economies in the world. 

How did the markets react?

PSU Banks gained, despite the market fall. Central Bank of India, Indian Overseas Bank (IOB) and Bank of Baroda gained between 1-7%, while the Nifty PSU Bank index was up by 0.26%. An interest rate hike ultimately increases the lending rate which benefits the banking sector.  

On the flip side, Auto and Realty indices were down by 1.1% and 0.8% respectively. Rising interest rates makes home loans and car loans expensive which reduces affordability for end consumers.

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