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Surprise rate hikes cause 2-3% Nifty decline on the day. Rate hike cycles trigger 6-9 month underperformance in Housing Finance, Real Estate, and Auto. Banking sector initially falls but recovers as NIM expansion materializes. The bottom is typically 6 months into the hike cycle.
Nifty 1 Day
-2.3%
Nifty 3 Days
-3.0%
Nifty 1 Week
-3.5%
Nifty 1 Month
-5.2%
RBI held an unscheduled MPC meeting on May 2-4, 2022 and hiked repo rate by 40bps to 4.4% — the first hike since 2018. This was followed by 5 more hikes taking rates to 6.5%. Nifty fell 5% in the month. Rate-sensitive sectors underperformed for 6 months.
Rising mortgage rates reduce affordability
Higher cost of capital hurts real estate developers
Auto loans become expensive — demand dampened
RBI held an unscheduled MPC meeting on May 2-4, 2022 and hiked repo rate by 40bps to 4.4% — the first hike since 2018. This was followed by 5 more hikes taking rates to 6.5%. Nifty fell 5% in the month. Rate-sensitive sectors underperformed for 6 months.
Historically, HDFC Ltd, HDFC Bank were among the strongest performers in the aftermath, based on real 1-week/1-month return data.
The Nifty 50 moved -3.5% in the following week and -5.2% over the following month.
Surprise rate hikes cause 2-3% Nifty decline on the day. Rate hike cycles trigger 6-9 month underperformance in Housing Finance, Real Estate, and Auto. Banking sector initially falls but recovers as NIM expansion materializes. The bottom is typically 6 months into the hike cycle.
Regime
bear
Repo Rate
4.4%
India VIX
25.8
Data Confidence
90%