New Delhi, May 4 (PTI) Interest rate-sensitive realty, auto and bank stocks on Wednesday fell sharply after the Reserve Bank hiked its key interest rate by 40 basis points (bps) in an unexpected move to tame rising inflation.

From the realty pack, DLF tanked 5.28 per cent, Indiabulls Real Estate declined 5.05 per cent, Sunteck Realty went lower by 4.61 per cent, Godrej Properties fell 4.33 per cent, Sobha (3.82 per cent), Oberoi Realty (3.37 per cent) and Brigade Enterprises (2.24 per cent) on the BSE.

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The BSE realty index declined by 3.31 per cent to 3,418.45.

Among auto counters, Ashok Leyland plunged 4.44 per cent, Bajaj Auto tanked 3.54 per cent, TVS Motor (3.31 per cent), Maruti (3.17 per cent), Hero MotoCorp (3.08 per cent), M&M (2.70 per cent) and Tata Motors (2.11 per cent).

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The auto index fell by 2.53 per cent to 24,280.80.

Among bank stocks, Bank of Baroda tumbled 4.12 per cent, IndusInd Bank dipped 3.98 per cent, HDFC Bank (3.34 per cent), Bandhan Bank (3.33 per cent), AU Small Finance Bank (3.22 per cent), ICICI Bank (2.31 per cent), State Bank of India (2.27 per cent) and Federal Bank (0.05 per cent).

The BSE bank index declined 2.29 per cent to 40,583.54.

The 30-share BSE benchmark Sensex tumbled 1,306.96 points or 2.29 per cent to settle at 55,669.03. During the day, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60.

"The surprise mid-cycle rate hike by the RBI is driven by factors such as inflation concern, the perception that the RBI is falling behind the curve, external sector pressures (capital outflow, higher trade deficit, weaker rupee) and likelihood of 50 bps rate hike by the Fed.

"The impact on the equity market is likely to be negative in the short term," said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers.

Home, auto and other loan EMIs are likely to increase after the Reserve Bank of India (RBI) hiked its key interest rate by 40 bps in a surprise move on Wednesday in an effort to tame inflation that has remained stubbornly above target in the recent months.

The increase in repo rate - the rate at which RBI lends to commercial banks - to 4.40 per cent from a record low of 4 per cent is the first since August 2018. It is also the first instance of the RBI Governor-headed monetary policy committee (MPC) holding an unscheduled meeting for raising interest rates.

The RBI also hiked the cash reserve ratio (CRR) by 50 bps to 4.5 per cent, which will now require banks to park more money with the central bank and leave them with less to loan to the consumers.

"The benchmarks tumbled hard in today's session after a surprise move by the RBI to raise repo rate by 40 basis points. The street was already nervous as Fed Chairman Jerome Powell already hinted towards half-a-point rate hike in today's meeting outcome scheduled late at night. Hence, investors are likely to feel the heat in the short term as central banks across the globe try to curb inflation by hiking interest rates," said Prashanth Tapse, Vice President (Research), Mehta Equities Ltd.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)