Banking Stocks See Selling Pressure Ahead Of RBI Policy

Benchmark indices were down sharply in trade, as investors remained worried that the Reserve Bank of India could hike interest rates by 0.50%.

Shares in frontline banks were down with HDFC Bank shedding as much as 1.47%, while ICICI Bank was down 1.49% and SBI was down 0.25%. The Bank Nifty was down more than 1% in trade.

Anand Nevatia, Fund Manager, Trust Mutual Fund, says "Crude has once again inched up to $120 with news of China opening up. This combined with geo-political tensions continue to keep inflation expectations high. With RBI now prioritising inflation targeting over growth, we expect 35-50bps rate hike along with hike in CRR to bring down liquidity. We should be prepared for a series of rate hikes as the central bank aims to reach a neutral to positive real rates."

Half the respondents to a CNBC-TV18 poll expect the repo rate to hike by 50 basis points in June, while the other half expect an increase of around 25 and 50 basis points. With the markets falling for two successive days, most of the hike may have been factored in. A hike of just 25 basis points, might see markets cheering, though anticipated GDP numbers and inflation numbers would also be important for the markets.