A recent press report said that the rising interest rates have pulled down the banking indices by as much as 13 per cent since the last rate increase by the RBI. The BSE Bankex and Bank Nifty fell by 13.57 per cent and 13.61 per cent, respectively between July 26 and August 18.
Reports said that analysts feel that investors are nervous after the last RBI policy review when the key rates were increased by 50 basis points. The increase in the interest rates has hurt the financial sector, which was considered to be one of the most robust and reliable sectors by investors and fund managers alike.
Ms Anita Gandhi, Whole Time Director, Arihant Capital Markets said that the market was “undergoing pressure with FIIs inflows having reduced. FIIs have particularly reduced their exposure to the banking sector. Both global and domestic factors have led to this reduction.
Reports also said that there have been talks of imposing financial transaction tax in France and Germany, which led to a 6 per cent drop in global stocks, said market experts. Domestically, the concerns have been over rising NPAs and rising interest rates, they added.
Experts have also said that the RBI is expected to raise interest by 25 basis points. The hike has not only affected the bankex but has also made the borrowers of home loan and other loans hesitate in taking up loans.