Indian shares snapped a four-day winning streak on Thursday, weighed by auto and consumer stocks after the Reserve Bank of India pushed bets of a rate cut further ahead, with inflation seen to be staying above its target.
The blue-chip Nifty 50 index closed 0.49% lower at 18,634.55, while the benchmark S&P BSE Sensex fell 0.47% to 62,848.64.
The RBI's monetary policy committee (MPC) kept the repo rate at 6.50% for a second straight meeting but signalled that monetary conditions would remain tight for some time on fears of inflation staying above the central bank's 4% target this year.
Overnight indexed swaps jumped after the policy statement, signalling markets were now pricing in a further delay in rate cuts.
"It is clear that the expectation of a rate cut in CY23 is pushed forward," said Amit Kumar Gupta, founder at Fintrekk Capital.
The stock indexes reversed course following a 0.30% spurt after the decision.
Twelve of the 13 major sectoral indexes declined, with the fast moving consumer goods (FMCG), auto, pharma sectors losing between 0.8% and 1.1%.
The rate-sensitive realty index slid 1.6% and was the top sectoral loser. The realty index had risen for six sessions in a row in the run-up to the RBI rate decision, adding 6.59% over the period.
The midcap index fell over 0.5%, snapping a 13-session winning streak after logging a fresh record high in intraday trading.
"Many small and midcap stocks are running up without any particular fundamental reason and mostly on low volumes," added Amit Kumar Gupta. "The game plan remains clear: buy slow, sell fast, stay with conviction and avoid junk."
High-weightage IT stocks fell over 1% on rate hike concerns ahead of policy decisions by the U.S. Federal Reserve and European Central Bank next week. All the 10 constituents of the IT index logged losses.
