Nifty Bank, Auto, Realty skid 1% as inflation stokes RBI rate hike fears - Business Standard

Indian equity indices, led by the Nifty Bank, Auto and Realty sub-indices, fell roughly 1% as rising inflation fuelled expectations that the Reserve Bank of India may tighten monetary policy. The transmission runs through the rate channel: higher expected policy rates lift bond yields and raise borrowing costs, which weighs most heavily on rate-sensitive sectors such as realty and autos, where financing costs and consumer credit drive demand. Banks face a mixed effect, as tighter policy can support net interest margins over time but also raises near-term concerns about loan growth and asset quality, while a hawkish repricing tends to strengthen the rupee via higher carry returns and can attract foreign portfolio inflows into fixed income. The NIFTY and BANKNIFTY indices are most exposed given their heavy weightings in these sectors, and the INR's direction will depend on whether rate expectations or foreign capital flows dominate. Traders should watch the next Consumer Price Index release and the RBI's upcoming monetary policy statement, as the inflation print and the central bank's guidance on the policy path will determine whether the rate-hike

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