Reserve bank of India has given a jolt to banking sector by hiking the repo rate and one may see another round of hike as early as 20 April 2010. Due to repo hike the liquidity is sucked out of the market and as a net result banking stocks get the biggest axe.

This move of RBI will have an adverse impact on banking stocks and non availability of easy loan means that auto segment and real estate stocks will also get the thumbs down attitude.

G Raguraj , the deputy general manager in his signed statement has stated that RBI is raising the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 4.75 per cent to 5.0 per cent with immediate effect and will also be raising the reverse repo rate under the LAF by 25 basis points from 3.25 per cent to 3.5 per cent with immediate effect. He further opined that these measures should anchor inflationary expectations and contain inflation going forward. As liquidity in the banking system will remain adequate, credit expansion for sustaining the recovery will not be affected.

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