RBI policy action to drive growth in rate sensitives: Experts

By: | Published: September 29, 2015 8:10 PM

Terming the Reserve Bank of India (RBI) move of lowering the key interest rate by 0.50 per cent as a positive surprise, market analysts believe the policy action will drive urban consumption and growth in rate-sensitive sectors.

Terming the Reserve Bank of India (RBI) move of lowering the key interest rate by 0.50 per cent as a positive surprise, market analysts believe the policy action will drive urban consumption and growth in rate-sensitive sectors.

“The RBI policy rate cut of 50 bps comes as a pleasant surprise. We believe today’s policy action will significantly drive faster transmission to the end borrower. It will drive urban consumption and drive growth in rate-sensitive sectors,” said Jimeet Modi, CEO, SAMCO Securities.

Home and corporate loans will cost less as the Reserve Bank today lowered the key interest rate by 0.50 per cent — the biggest cut in over three years — to bolster the economy.

“RBI has given a positive surprise to markets, by cutting repo rate by 50 bps, as against expectations of 25 bps cut. Overall, we continue to expect a downward bias in interest rates in India, which should act as one of the catalysts for investment revival, going hand in hand with favourable government measures,” said Dinesh Thakkar, CMD, Angel Broking.

In its fourth bi-monthly monetary policy for the current fiscal, RBI cut benchmark repurchase (repo) rate from 7.25 per cent to 6.75 per cent, lowest in four and a half years.

“Overall, the policy was more forward-looking and trying to address a slowing economy as the global growth looks anaemic at this stage. While the domestic markets may see this as a positive, the stock market direction will depend on the global cues,” said Dilip Bhat, Joint MD at Prabhudas Lilladher.

RBI lowered its economic growth forecast for the current fiscal to 7.4 per cent from its previous projection of 7.6 per cent.

“RBI gave a positive surprise by cutting interest rates by 50 bps versus the expectation of 25 bps. The rate cut should help boost sentiment in the Indian markets which have staged a sharp recovery,” said Nitasha Shankar, Vice-President – Research, YES Securities.

The BSE Sensex, which was over 300 points down, staged a recovery after the policy announcement and was trading over 200 points higher in late-afternoon session.

“Overall, RBI’s policy has been decidedly positive for markets. RBIs projections relating to our economy are positive in the context of a world-wide slowdown and domestic market participants may do well to have a positive outlook for domestic bond markets in coming quarters,” said Killol Pandya, Head u2013 Fixed Income, Peerless Funds Management Co.

Nithin Kamath, founder & CEO of brokerage firm Zerodha, said: “RBI’s decision to lower the repo rate by 50 bps is a much needed breather for the economy as a whole, this is a huge positive for the markets. Hopefully, this should ease up the liquidity and trigger corporate capex cycle and earnings.”

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