Repo rate hike, Impact on market

The Reserve bank of India raised its repo rate by 35 basis points to 6.25% to curb inflation pressures. To put it simply, an increase in repo rates raises the cost of borrowing.
impact on sectors that are carrying huge debts
When the repo rate rises, the borrowing cost for banking institutions also rises, which is passed on to account holders in the form of more expensive loans as well deposits. Borrowing money from a bank becomes more expensive. And the interest rate of the existing loans also increases, so the institutions have to pay more to pay the increased interests which can affect their profitability.

As per market capitalization Midcap companies are going to be hit strongly because if you follow their fundamentals you will find although their loan amount is not as huge as large-cap, their debt-to-equity ratio is much higher. And there are many companies in this segment. So this is going to be hard for this category.

If you look into the sectors, you will find the infrastructure and manufacturing sectors will face problems. Infra companies rely on financial institutions for a huge loan to bid on large projects and manufacturing giants depend on loans for setting up giant industries. Loans become expensive for them so they will borrow less because borrowing directly impacts their profitability.

if you are thinking about the financial sector, you will find a high debt-to-equity ratio. But it shouldn’t be a concern to you because they operate like that. All the FDs, savings accounts and current account balances in these institutions fall in debt categories so you should check NPAs in these institutions. Because many banks, NBFCs, and small PSUs lead to a crisis for their growing NPAs.