Financial stocks, led by HDFC Bank, on Tuesday dropped by as much as 7 per cent on the BSE after the Reserve Bank raised its lending rates by 25 basis points to tame inflation.
Following the RBI move the rate-sensitive stocks, mainly banking, saw massive selling pressure. HDFC Bank plummeted by 7.25 per cent to Rs 449, country's largest lender SBI plunged 4.12 per cent to Rs 1,828.80 and ICICI Bank lost 1.89 per cent to Rs 852.85.
Besides, Axis Bank was trading 4.78 per cent lower, Punjab National Bank fell 3.70 per cent and Union Bank was down 1.20 per cent.
Led by losses in the bank shares, the BSE Banking index was trading at 10,743.14, 2.80 per cent lower than the last close during the afternoon trade.
Market experts said that rate-sensitive stocks declined amid fears that loans, including those for home and auto, may become more expensive after the Reserve Bank has raised key rates for the fifth time this fiscal to tame inflation.
Today's hike by the apex bank is the 13th since March, 2010. The series of rate hikes has cumulatively increased interest rates by 525 basis points.
Meanwhile, in a knee-jerk reaction to the rate hike, auto and realty shares, too, witnessed some selling pressure.
Realty giant DLF was trading with a loss of 0.72 per cent, Parsvnath Developers was quoting down by 2.40 per cent and Unitech fell by 1.30 per cent.
From the auto space, Bajaj Auto lost 0.69 per cent.
However, the BSE benchmark shrugged-off the rate hike and was trading 123.60 points higher at 17,062.88 at 1315 hours.