India Stocks: Indian shares decline as RBI rate hike signals tighter policy

Titan

07/10/2026 11:10

RBI lifts benchmark repo rate 25 basis points to 5.5%, first increase since February 2023
RBI shifts policy stance to calibrated tightening, citing inflation risks from oil and global monetary tightening
Rupee weakens against dollar and bond yields rise after policy announcement
Higher borrowing costs may hit sectors unevenly despite RBI's 7.1% FY2027 growth forecast
Titan fell after analysts flagged weaker-than-expected September-quarter jewellery growth
Updates for markets close
By Bharath Rajeswaran
Oct 7 (Reuters) - Indian shares snapped two days of gains on Wednesday after the central bank raised interest rates and shifted its policy stance to "calibrated tightening", underscoring inflation risks from high oil prices and tighter global monetary policy.
The Reserve Bank of India hiked the repo rate by 25 basis points to 5.5%, its first increase since February 2023.
The Nifty 50 .NSEI fell 0.76% to 22,603.05, while the Sensex .BSESN shed 0.59% to 72,638.7. Both indexes had fallen about 0.7% before the decision.   
The rupee INR=IN weakened to a five-month low against the dollar and bond yields rose after the policy announcement. 
"For equities, RBI's rate hike marks a subtle but important shift, the easy valuation tailwind from lower rates is beginning to fade and earnings will increasingly have to justify valuations," said Rishabh Nahar, partner and fund manager at Qode Advisors.
Fourteen of the 16 major sectors fell. Small-caps .NIFSMCP100 gained 0.3%, while mid-caps .NIFMDCP100 lost 0.6%.
Financials .NIFTYFIN and banks .NSEBANK pared losses to close 0.1% lower each, after falling 0.5% and 0.7% before the RBI decision.
Private banks .NIFPVTBNK and state-owned banks .NIFTYPSU rose 0.1% and 1%, respectively.
"Banks could see support to margins, since loan rates reset faster than deposit costs, and short-end bond yields are likely to rise," said Thomas J Priju, portfolio manager at Karma Capital.
The absence of further liquidity tightening also eased concerns over funding costs and margins for financials, analysts said.
Still, higher borrowing costs could weigh on businesses, offsetting support from the RBI's upgraded 7.1% growth forecast for fiscal 2027.
Other rate-sensitive sectors such as auto .NIFTYAUTO, FMCG .NIFTYFMCG and real estate .NIFTYREAL indexes fell 1.6%, 0.9% and 1.8%, respectively. 
Metals .NIFTYMET dropped 2.3%, tracking weaker global prices as a firmer dollar made commodities costlier for overseas buyers. MET/L
Titan shares TITN.NS fell 3.8% after analysts flagged weaker-than-expected jewellery growth in the September quarter. 
Brent crude rose 1.3% to $102 a barrel on lingering risks to US output and Houthi attacks on Saudi Arabia.O/R

 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Ronojoy Mazumdar, Subhranshu Sahu, Harikrishnan Nair, Janane Venkatraman , Mrigank Dhaniwala and Nivedita Bhattacharjee)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))