RBI's 25 bps rate hike drags Sensex and Nifty lower on October 7

The Sensex fell as much as 529 points, or 0.7%, to an intraday low of 72,539.18, while the Nifty 50 dropped 191 points, or 0.8%, to 22,585.05. The decline reflected investor caution after the RBI shifted its policy stance to 'calibrated tightening' and signalled that rate cuts were unlikely in the near term.

During the October 5-7 policy meeting, the RBI increased the Standing Deposit Facility rate to 5.25%, while the Marginal Standing Facility rate and bank rate remained unchanged at 5.75%. RBI Governor Sanjay Malhotra emphasized that the decision followed a detailed assessment of macroeconomic and financial conditions.

Global factors added pressure, with Brent crude prices rising over 1% to around $102 a barrel due to supply concerns after attacks by Yemen's Houthis on Saudi Arabia. The US 10-year bond yield also increased to 5.31%, contributing to risk-off sentiment.

Market breadth was weak, with only a few Sensex constituents ending higher. Kotak Mahindra Bank, Bharti Airtel, Bajaj Finance, Eternal and IndiGo were gainers, while Titan, BEL, Asian Paints, UltraTech Cement, Power Grid and Bajaj Finserv led losses. Sectorally, Nifty Metal fell the most at 1.5%, followed by Nifty Auto at 1.1%, while Nifty Bank, Nifty Financial Services, Nifty FMCG, Nifty Realty and Nifty IT each declined around 0.8%.

Analysts noted that while the rate hike was already priced in, the RBI's stance and growth-inflation outlook would be key for future market direction. The narrowing interest-rate differential between India and the US was also cited as a factor influencing capital flows and rupee stability.