Realty hit by RBI stance, Nifty ends flat

Equity benchmarks closed rangebound session on a flat note and shrugged off key rates hike by the Reserve Bank of India (RBI). The consolidation was imminent today after a steep rally on Monday. However, the realty companies' shares have seen sharp cut on expectations that banks may hike home loan rates.

To keep the inflation under control, the RBI has hiked repo (rate at which banks borrow from RBI) and reverse repo (rate at which RBI borrows from banks) rates by 25 bps each for the sixth time this year, which was on expected lines.

Nilesh Shah, Deputy MD of ICICI Prudential AMC said, "From an equity market point of view, this credit policy is inline with expectations. There was consensus that 25-25 will be a rate hike and potentially there will be a pause. The RBI has exactly delivered on the same. Anyway the markets are driven more by flows and less by fundamentals, so this policy will not have any material impact on the market side."

However he said it would be beneficial for the bond market. "There is a ground being prepared for improving the liquidity condition either by way of CRR cuts or by way of a fixed intervention or by way of expanding the RBI's balance sheet. Either way, it will be beneficial for the bond market. You cannot run an economy which wants to grow at 8-9% but with a negative Rs 70,000 crore liquidity for a longer period of time."

The central bank, however, has clearly indicated that there is no need for further hikes in the near term. ''The likelihood of further rare actions is relatively low and there is no need for further rate hikes in the immediate term,'' D Subbarao governor said adding that the rates have been hiked in order to sustain anti-inflationary thrust of policy and to contain liquidity deficit within a reasonable limit.

The 30-share BSE Sensex closed at 20,345.69, down 9.94 points while the 50-share NSE Nifty rose just 1.45 points to 6,119. The Nifty November futures ended at 30 points premium, as per provisional data.