File photo Photograph:( Zee News Network )
Stock market indices ended nearly 1% lower on Thursday following the 25 basis points hike in repo and reverse repo rates by the Reserve Bank of India (RBI) on Wednesday.
The S&P BSE Sensex ended at 37,165, down 356 points while the broader Nifty50 index settled at 11,245, down 101 points.
Domestic sentiment was also dampened owing to fears of an escalating trade dispute between the United States and China which triggered a fall in bonds yields and stocks, particularly among exporters.
On Wednesday, the RBI hiked policy rates for the second time in a row on fears of rising inflation rates.
Economists now expect the central bank to go in for a prolonged pause and wait to see the impact of the globally evolving scenario.
Following the rate hike, which was anticipated by many in the market, the policy repo rate stands at 6.50 per cent. The policy stance continues to remain neutral.
The Central Bank cautioned that India needed to “run a tight ship” to avoid getting affected by the currency war that had started all over the world.
It projected inflation at 4.6 per cent in the second quarter, and 4.8 per cent in the second half of the financial year 2018-19, with risks evenly balanced.