Status quo on key lending rates, subdues markets

Mumbai, Aug 4 (IANS) Investor sentiments were subdued after the central bank maintained status quo on key lending rates, plunging a barometer index of the Indian equity markets by more than 115 points on Tuesday.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) closed flat — ending the day’s trade 26.15 points or 0.31 percent down at 8,516.90 points.

The Sensex of the S&P Bombay Stock Exchange (BSE), which opened at 28,225.04 points, closed at 28,071.93 points — down 115.13 points or 0.41 percent from the previous day’s close at 28,187.06 points.

The Sensex touched a high of 28,264.72 points and a low of 27,866.12 points in the intra-day trade.

The Reserve Bank of India (RBI), in its third monetary policy review, kept the repurchase rate, or its short-term lending rate, unchanged at 7.25 percent.

Accordingly, the reverse repo rate, or the short-term borrowing rate, was unchanged at 6.25 percent.

The cash reserve ratio (CRR), or the liquid money banks have to compulsorily hold, stood unchanged at 4 percent.

The decision to maintain the status-quo disappointed investors, as a general consensus had appeared that showed that the current review might be the last chance that RBI had to cut rates in this calendar year.

Markets are doubtful over the RBI’s ability for a future easing of the monetary policy in the hindsight that inflation might spiral up again and the US Fed’s decision on its own rates is coming up in September.

“There was disappointment in the markets as investors expected a cut based on current data which showed that the inflation is coming under control, stable macro fundamentals and falling crude oil prices,” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.

According to Devendra Nevgi, chief executive of ZyFin Advisors, Tuesday’s knee-jerk reaction will not be long-lasting as markets will now focus cues given by RBI on future cuts.

“What’s more important for the markets is to assess the language used by the RBI on the Indian economy, oil prices, monsoon, inflation and the US rate hike. The analysis of language will give further impetus to the markets,” Nevgi observed.

Vaibhav Agarwal, vice president and research head at Angel Broking told IANS that if good monsoon, low inflation coupled-with rupee stability and falling commodity prices continue then the RBI will have room to cut rates in the coming time.

Sector-wise, healthy buying was observed in metal, automobile and banking stocks. However, consumer durables, oil and gas, information technology (IT), capital goods and technology, entertainment and media (TECK) sectors came under selling pressure.

The S&P BSE metal index zoomed by 230.82 points, the automobile index rose 193.07 points and the banking index went up 103.12 points.

The S&P BSE consumer durables index declined by 86.33 points, followed by the oil and gas index which receded by 68.23 points, IT index decreased by 65.22 points, capital goods index fell by 64.39 points and the TECK index was lower by 40.25 points.

Major Sensex gainers during Tuesday’s trade were Tata Steel, up 3.39 percent at Rs.256.40; Hindalco Inds, up 3.36 percent at Rs.109.30; Coal India, up 2.82 percent at Rs.442.85; State Bank of India (SBI), up 2.54 percent at Rs.288.20; and Mahindra and Mahindra (M&M), up 2.18 percent at Rs.1,362.85.

The major Sensex losers were Hero MotoCorp, down 2.73 percent at Rs.2,624.25; Gail, down 2.53 percent at Rs.345.10, ONGC, down 2.40 percent at Rs.266.90; Wipro, down 2.16 percent at Rs.558.20; and Tata Motors, down 1.85 percent at Rs.380.95.

Among the Asian markets, Japan’s Nikkei was down 0.14 percent and Hong Kong’s Hang Seng inched down by 0.02 percent. However, China’s Shanghai Composite Index was higher by 3.69 percent.

In Europe, the London FTSE 100 index inched down by 0.10 percent. Germany’s DAX Index slipped by 0.10 percent. The French CAC 40 fell by 0.40 percent at the closing bell here.

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