Indian shares were battered down nearly 1 percent on Tuesday on fears of a quick-succession rate increase by the central bank following its quarter-point hike in key rates, as it fights sticky inflation. The Reserve Bank of India (RBI) raised interest rates by 25 basis points, as expected, to clamp down on resurgent inflation, warning higher food prices could become entrenched if steps to boost output are not taken.
Interest rate sensitives - BSE banking index, BSE realty index and BSE auto index - dropped between 1.1 percent and 2.3 percent. The 30-share BSE index shed 0.95 percent or 181.83 points to 18,969.45, with 19 components closing in the red. The 50-share NSE index shed nearly 1 percent to 5,687.40 points.
Foreign funds have pulled out around $892 million from Indian equities so far this year, with the main index declining 7.5 percent. Automobile majors Maruti Suzuki, Mahindra & Mahindra, Bajaj Auto, and Tata Motors shed between 0.2 percent and 2.3 percent. Top-listed real estate firm DLF dropped 0.7 percent. Separately, HSBC Securities downgraded DLF to "neutral" from "overweight". Declining shares outpaced advancing ones in a ratio of 1.4:1 on a low volume of 259 million shares. Indian markets will be closed on Wednesday for a public holiday.
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