Indian shares were little changed after the central bank raised short-term interest rates by an expected quarter-point on Tuesday and indicated a pause in the near term. Property stocks fell with DLF and Unitech shedding more than 3 percent each after the central bank raised the risk provisioning to rein in a jump in asset prices.
The Reserve Bank of India (RBI) raised its lending and borrowing rates for the sixth time this year and said it would remain vigilant about inflation that remains above its comfort level. The bank also said the likelihood of further rate actions in the immediate future was relatively low.
"They have done a good job and it gives the market comfort that liquidity will not be affected. There may be some knee-jerk reaction, probably in banking and real estate sector stocks, but I expect the market to stabilise after that," said Deven Choksey, managing director, KR Choksey Shares & Securities.
The 30-share BSE index closed down 0.05 percent, or 9.94 points, at 20,345.69, with 17 of its components losing ground. State Bank of India was up 0.2 percent, while ICICI Bank was barely changed. Neeraj Dewan, director of Quantum Securities in New Delhi, said a two-day US Federal Reserve meeting that ends on Wednesday would set the trend for the stock market.
India's manufacturing sector expanded in October at a much faster pace than in September, supported by strong output and a sharp rise in new business, a purchasing managers' index (PMI) showed on Monday. Record foreign fund inflows of $24.8 billion this year have lifted the benchmark BSE index 16.5 percent year-to-date.
Leading automobile makers - Maruti Suzuki, Mahindra & Mahindra and Tata Motors - dropped 0.8 percent to 1.4 percent on concerns costlier loans may dampen consumer spending. ACC gained 4.2 percent to 1,056.95 rupees, after India's No 2 cement producer said on Monday shipments in October rose 13.6 percent from a year earlier to 1.92 million tonnes..
Hero Honda, 26-percent-owned by Japan's Honda Motor, rose 0.7 percent to 1,852.25 rupees, after the country's top motorcycle maker reported a 42.7 percent rise in October two-wheeler sales. In the broader market, laggards led the gainers in the ratio of 1.6 to 1 on relatively lower volume of 382.5 million shares. The broader 50-share NSE index ended up 0.02 percent at 6,119 points.