Sensex welcomes RBI’s jumbo 50 bps rate cut, surges over 500 points
The Indian benchmark indices surged on Friday after the RBI Governor Sanjay Malhotra announced a jumbo 50 bps rate cut — from 6 per cent to 5.5 per cent
- MUMBAI — The Indian benchmark indices surged on Friday after the RBI
Governor Sanjay Malhotra announced a jumbo 50 bps rate cut — from 6 per cent to
5.5 per cent — and a 100 basis point cut in the Cash Reserve Ratio (CRR), from
4 per cent to 3 per cent.
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- The immediate effect of the decision was seen on the
Indian stock market. At around 10.46 am, Sensex was trading 505.7 points or
0.62 per cent up at 81,947.74 while the Nifty added 168.40 point or 0.68 per
cent at 24,919.30.
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- Nifty Bank was up 682.95 points or 1.22 per cent at
56,443.80 . The Nifty Midcap 100 index was trading at 58,666.20 after rising
363.20 points or 0.62 per cent. Nifty Smallcap 100 index was at 18,480.85 after
climbing 48.25points or 0.26 per cent.
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- In the Sensex pack, Bajaj Finance, Axis Bank, Maruti
Suzuki, Kotak Mahindra Bank and IndusInd Bank were the top gainers. Sun Pharma,
Infosys, Nestle India and HCL Tech were the top losers.
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- “The change in monetary stance from accommodative to
neutral also indicates that more rate cuts are unlikely unless the situation
warrants. The credit growth that this rate cut will hopefully stimulate will
compensate for the dip in margins,” said Dr VK Vijayakumar, Chief Investment
Strategist, Geojit Investments Ltd.
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- Madhavi Arora, Chief Economist, Emkay Global, said that
the RBI appears to have front-loaded all policy actions, be it
higher-than-expected rate cuts or infusing durable albeit staggered liquidity
via lower CRRs.
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- “All of that now implies that the ball is in the banks’
court to transmit easier financial conditions faster,” Arora mentioned.
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- Earlier, the domestic benchmark indices opened flat ahead
of the key RBI MPC decision, as buying was seen in the IT and PSU Bank sectors
in the early trade. India VIX declined by 4.21 per cent to 15.08, suggesting
that the market is pricing in lower volatility in the near term.
