Just when the main indices were closing in on 52-week highs comes the somewhat ‘unexpected’ RBI rate hikes. That the central bank would raise key rates was a given with inflation spiking to nearly double digits. What surprised was the timing of the announcement. Also, post the January meet, RBI had maintained it would not hike rates before April meet. But last week, a deputy governor said the central bank was open to revising rates up before April 20. May be he was not taken seriously.
When trading resumes today, we expect to a fall of about 1-1.5% in the key indices. The fall will be paced by banks and other rate sensitive sectors like real estate. Whether the decline stops there or continues is a mystery still. One will also have to keep an eye on global cues, especially from Europe where Greece will hold a summit with regional leaders for emergency aid. F&O expiry and a public holiday will add to the uncertainty and volatility.
