RBIs status quo on key rates gives fillip to bourses

Written by Markets Bureau | Mumbai, Apr 29 | Updated: Apr 30 2008, 05:55am hrs
The Reserve Bank of India (RBI), which kept repo and reverse repo rates unchanged in its annual credit policy, gave the much-needed relief to the bourses on Monday.

The 30-share Bombay Stock Exchange (BSE) Sensex, after witnessing a jittery early session, managed to move northwards to close at 17,378.46 points, a gain of 362.50 points or 2.13%. Meanwhile, the broader Nifty ended above its 200-day moving average (DMA) for the first time since February 29 at 5,195.50 points, a gain of 105.85 points or 2.08%.

Within a span of 15 days, the RBI has hiked the cash reserve ration (CRR) by 75 basis points (bps) to 8.25% and experts believe that the steps taken by the banking regulator to curb inflation is unlikely to put any upward pressure on interest rates. This move, along with the RBI's step to increase the limit of bank loans for housing having a lower risk weight of 50% from Rs 20 lakh to Rs 30 lakh, resulted in a rally of realty stocks with the BSE Realty index surging 482.17 points or 5.90% to end the day at 8,650.24 points.

Alex Mathew, head of research, Geogit Financial Services, said, Investors were expecting an interest rate hike, but the RBI only increased the CRR rate by a quarter percentage and untouched the repo and reverse repo rates which boosted the overall market sentiment. Market participants were buying interest sensitive banking, realty and auto sector stocks due to no change in interest rates and good demand was seen in IT stocks after the announcement from finance minister about the extended tax holiday for software exporters. Meanwhile, the government's decision to extend tax holiday for IT companies till March 2010, saw the BSE IT gain 211.07 points or 5.24% to close the day at 4,237.81 points. The BSE Bankex followed suit with gain of 147.91 points or 1.68% to close at 8,964.75 points.