The stock market showed a lukewarm response to the quarterly monetary policy announced by the Reserve Bank on India (RBI) on Tuesday. Bank stocks, led by ICICI Bank, fell as the RBI kept key rates unchanged, and contributed to decline of Sensex by 43 points to 15,331.94 despite strong cues from Asian markets.
“There was nothing in the policy for the market. Now-a-days, most market movements are initiated in punctuated intervals rather than triggered by a single event like the RBI policy announcement,” said SP Tulsian, investment advisor.
Most market participants felt that the policy announcement was on expected lines with no change in repo rate, reverse repo and cash reserve ratios. “It is a status quo monetary policy. Still, I would advise a careful approach since issues such as the non-performing assets (NPAs) remain as highlighted by RBI,” said Ambareesh Baliga, vice-president (equities) at Karvy Stock Broking. State Bank of India, Bank of India and ING Vysya Bank were among the top losers on the Bombay Stock Exchange (BSE) on Tuesday. Market participants do not feel interest rates are going to reduce despite the concerns on inflation remain. “Interest rates are not going to soften. Interest rates will be range-bound for most of the rate sensitive industries such as automobiles and housing. The growth has to come from that range,” added Tulsian.
“The policy has successfully attempted to balance the risks between current growth and inflation. The RBI has decided to continue with the accommodative monetary stance in order to aid the return of the economy to the high growth path while at the same time highlighting the potential build-up of inflationary pressures going forward. It is commendable that they have chosen to prepare the markets of an exit strategy sometime in the future by mentioning that the accommodative stance is not the steady state stance,” said B Prasanna, managing director & CEO, ICICI Securities Primary Dealership Ltd.