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| RBI rate hike spawns 2nd biggest crash in Sensex | | |
MUMBAI, APR 2
A hike in key lending rate by Reserve Bank scared investors away from the stock market, which today plunged by a huge 617 points with banking and interest rate sensitive sectors like auto, consumer durables and real estate queueing up at the receiving end.
The fall, the second biggest single-day point-wise loss after the 826-point drop on May 18 last year, also rekindled memories of 'Black Monday' - a term that alludes to the first day of the week being the worst day for trading given the number of falls on this day.
Investors began selling heavily in response to RBI's decision on Friday evening to hike its short-term lending rate (repo) by 25 basis points with immediate effect and cash reserve limit by 50 basis points in two tranches to tame soaring inflation.
Shares went on a free fall with absolutely no support emerging at lower levels, as fears of the rate hike slowing down growth overpowered the market sentiment.
The Bombay Stock Exchange (BSE) 30-share sensitive index, Sensex, opened with a huge downside gap of over 260 points at 12,811.93 and gradually moved downwards to close at 12,455.37, a steep fall of 616.73 points or 4.72 per cent over Friday's close of 13,072.10.
Other falls on Black Monday, though hardly close to today's, are the 564.71 drop on May 17, 2004, 462.91 points on May 15, 2006, 456.84 points on May 22, 2006 and 471.09 points on March 5, 2007.
The wide-based S&P CNX Nifty of the National Stock Exchange (NSE) also plunged by 187.95 points, the third largest fall in absolute terms, or 4.92 per cent to 3,633.60 from previous close of 3,821.55.
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