BENGALURU, Aug 10 (Reuters): Indian shares declined on Thursday, dragged by financials on the central bank's measures to reduce excess liquidity, and consumer stocks on inflation concerns, after the Reserve Bank of India held its key rates steady, as expected.
The Nifty 50 closed 0.46 per cent lower at 19,543.10, while the S&P BSE Sensex fell 0.47 per cent to 65,688.18.
While the RBI kept the key repo rate unchanged for the third time in a row at 6.5 per cent, Governor Shaktikanta Das said there could be a substantial rise in headline inflation in the near-term and flagged uncertainty in the domestic food price outlook.
The RBI also raised its retail inflation forecast for fiscal 2024 to 5.4 per cent from 5.2 per cent earlier.
Consumer stocks like Asian Paints, ITC, Britannia Industries and Nestle India were among the top Nifty 50 losers.
Sectors sensitive to domestic interest rates like financials, banks, public-sector banks, private lenders, auto and realty fell between 0.25 per cent and 0.90 per cent.
The RBI also asked banks to set aside a larger part of incremental deposits under the cash reserve ratio (CRR) to tighten liquidity in the near term.
"Overall, the incremental CRR was unexpected and a reduction in liquidity surplus represents monetary tightening," said Nikhil Gupta, chief economist at brokerage Motilal Oswal Financial Services.
The governor said the measure will be temporary and the RBI will review it on Sept. 8.
The central bank's commitment to tackle inflation "suggests that rate cuts are clearly out of sight in the near term," said Anitha Rangan, economist and associate director at Equirus group.
Among individual stocks, Zee Entertainment Enterprises jumped 16.55 per cent after the National Company Law Tribunal approved the media firm's proposed merger with Sony, people present at the hearing said.
