The stock markets reversed early losses after the central bank cut its key interest rate by 50 basis points versus expectations of a 25-basis-point cut. The BSE Sensex closed 161.82 points up at 25,778.66. Nifty closed 47.60 points up at 7,843.
Domestic equity markets reversed losses while the benchmark 10-year bond surged to its highest in more than two years after the Reserve Bank of India (RBI) cut interest rates by a bigger-than-expected 50 basis points and allowed for steady increase in foreign investment limit in government securities. The BSE Sensex closed 161.82 points up at 25,778.66. Nifty closed 47.60 points up at 7,843.
The RBI cut the repo rate from 7.25 per cent to 6.75 per cent, while it left cash reserve ratio unchanged at 4 per cent.
Brokers said the RBI’s decision to cut repo rate by 0.50 per cent to 6.75 per cent was better than market expectations and buoyed trading sentiments.
In the 50-share index, Maruti Suzuki, HDFC, Coal India, IndusInd Bank, Bank of Baroda gained between 1.80 per cent and 3.30 per cent. On the other hand, Vedanta, Bosch, BPCL, Hindalco and Tata Steel dipped between 3.10 per cent and 5.70 per cent.
Nithin Kamath, founder and chief executive officer, Zerodha said, “RBI’s decision to lower the repo rate by 50 basis points (bps) is 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.”
Rate sensitive stocks remained top gainers in the BSE sectoral indices. The BSE Realty index gained the most — 1.99 per cent at 1,368.55, followed by the BSE Bankex (0.90 per cent) and BSE Auto index (0.76 per cent).
Here is Sunil Jain, Managing Editor of The Financial Express’ take on RBI rate cut:
The BSE Metal index declined 1.45 per cent at 6,611.31.
Dipen Shah, head of private client group research, Kotak Securities, said, “Rate sensitive stocks rose on the back of the RBI rate cut whereas metal stocks suffered on back of continuing Chinese concerns.”
Getamber Anand, president, CREDAI, said, “The industry is welcoming RBI Governor’s announcement of rate cut by 50 basis points, this was long overdue. Not only in Real Estate, but across the manufacturing industries and businesses, everyone is feeling encouraged by this announcement.”
European shares fell for the second day in a row on Tuesday as weakness in the commodities sector hit markets, though battered miner Glencore halted its slide after a bruising sell-off on Monday.
Markets through the day
3.30 pm: The BSE Sensex closed 161.82 points up at 25,778.66 on Tuesday. Nifty closed 47.60 points up at 7,843.
S&P BSE Sensex
3.00 pm: Meanwhile, State Bank of India (SBI) cuts benchmark lending rate by 0.4 per cent to 9.3 per cent. The share price of SBI was up 1.50 per cent at Rs 243.15. The BSE Bankex was up 1.06 per cent at 19,800. Adhil Shetty, chief executive officer, Bank Bazaar.com, said, “I expect base rate cuts by banks over next few days which will pass on the benefit to retail borrowers.”
Naveen Kukreja, managing director, Paisabazaar.com, said, “The 50 basis points cut was much than the market was expecting. This time it is a large cut by the RBI, we believe banks will surely pass the cut to retail borrowers on immediate basis. I expect banks will pass the cut between 30 basis points to 40 basis points to borrowers.”
2.47 pm: Sensex was up 270 points at 25,886. In the 30-share index, HDFC, Maruti and Mahindra & Mahindra were up 4.19 per cent, 3.63 per cent and 3.03 per cent, respectively.
2.25 pm: The BSE Midcap index and BSE Smallcap index were up 0.60 per cent and 0.18 per cent at 10,636 and 10,936, respectively. Sensex was up 371 points at 25,988.
2.11 pm: Sensex jumped 421 points at 26,038. S Naren, CIO, ICICI Prudential AMC, said, “We believe there was substantial scope for interest rates to come down in India as a result of developments in commodities prices across the world. Hence, a 50 basis points rate cut is a step in the right direction to improve the long-term growth of the economy. Going forward the key factors required for driving growth would be Goods and Services Tax (GST), resolution of non-performing loans (NPL) problems and ease of doing business. Over a period of time, we expect further moderation in interest rates from current levels and investors should continue to invest in duration with an aim to benefit from the same.”
2.08 pm: Sensex was up 390 points at 26,007. Nifty was up 113.85 points at 7,909. Arun Singh, senior economist, Dun & Bradstreet India, said, “While it has been largely expected that the RBI should cut the repo rate, the front-loading of the rate cut has been more than anticipated. However, this will give room to the RBI to tinker the policy rate when the US FED hikes the policy rate. Till now, a cumulative 125 basis point reduction in the repo rate has not been adequately transmitted via the banking system. The onus now shifts to the banking system and the government for flow of funds to the productive system of the economy.”
1.52 pm: NSE Nifty was up 81 points at 7,877. Sahil Kapoor, chief market strategist, Edelweiss Financial Services, said, “The 50 basis points repo cut by RBI and the corresponding measures are indicative of a change in stance from being a strong inflation hawk to a data dependent dove. RBI has repeatedly indicated that its accommodative stance on monetary policy continued to be in place and the current policy statement indicates a renewed commitment towards growth. We believe this interest rate cut would support equity markets, lead bond yields lower and continue to support currency markets as growth focus attracts investments.”
1.46 pm: The top gainers on the Sensex were HDFC up by 3.76 per cent, M&M (up 3.09 per cent), State Bank of India (up 2.15 per cent), Larsen & Toubro (up 1.90 per cent). On the flip side, Vedanta down by 4.55 per cent, Hindalco (down 2.55 per cent) and Tata Steel (down 2.48 per cent) were the top losers. Sensex was up 275 points at 25,892.
1.07 pm: Shares of Lanco Infratech on Tuesday surged nearly 11 per cent following reports that the company may sell power projects having a capacity of 3,000 MW from 2018 onwards and expects to get Rs 25,000 crore, which would help pare debt and also infuse fresh capital into the group. The scrip was trading 9.87 per cent up at Rs 4.12 in the afternoon trade. Sensex was up 205 points at 25,822. Nifty was up 62 points at 7,858.
12.55 pm: Wiping off its initial losses, the benchmark BSE Sensex jumped by 172 points and the NSE Nifty regained the 7,800-level as rate-sensitive stocks rallied after the Reserve Bank cut interest rate by 0.5 per cent today. Sensex was up 0.68 per cent at 25,790. Nifty was up 0.59 per cent at 7,841.
12.06 pm: Meanwhile, Navneet Munot, chief investment officer, SBI Funds Management, said, “A cut of this magnitude was warranted and this will have positive ramifications on growth and markets. We should test 7.50 percent on 10-year yield with potential to go even lower. The linkage of real rates to 1-year treasury bill opens up room for further rate cuts.” Sensex was down 20 points at 25,596.
11.18 am: Home loans are set to become cheaper after the Reserve Bank of India on Tuesday in its monetary policy review announced to cut repo rate by 50 basis points to 6.75 per cent. Shares of SBI, IndusInd Bank and HDFC Bank were up 0.15 per cent, 0.62 per cent and 0.68 per cent.
11.11 am: Post rate cut interest sensitive banking and realty stocks turned green. The BSE Bankex and BSE Realty index were up 0.38 per cent and 0.93 per cent at 19,668 and 1,354. BSE Auto index was down 0.16 per cent at 16,989.
11.08 am: RBI Governor Raghuram Rajan surprised market analysts on Tuesday. A Reuters poll last week showed only one out of 51 economists had expected a 50 basis points rate cut, while 45 had expected a 25 bps cut. Sensex and Nifty were up 6 points and 10 points at 25,622 and 7,805.
Within minutes of RBI policy announcement, Andhra Bank cut its benchmark lending rates by 0.25 per cent. The other banks are likely to follow suit.
11.02 am: Sensex was up 86.54 points at 25703.38. Shares of HDFC was up over 2 per cent at Rs 1,199.70.
11.00 am: RBI cuts repo rate by 50 basis points. Sensex wiped off some its losses and was down 133 points 25,483. Repo rate is now at 6.75 per cent. Jyoti Vaswani, chief investment officer, Future Generali Life Insurance, said, “Repo rate cut of 50 bps by RBI is a positive surprise. On the back of a slowing private investment, RBI has delivered what industry wanted with an aggressive rate cut. Also, more importantly RBI will continue its accommodative stance and work with Government towards transmission of bulk of the 125 bps cut which augurs well for revival of capex cycle. The increase in the FPI limit for investment in central govt. securities and introduction of a separate limit for SDLs would go a long way in ensuring increased FII participation in the Indian Debt markets. It also indicates RBI’s comfort with the improving macro-economic scenario in India. Today’s policy actions should be accepted positively by both equity and debt markets.”
What is Repo Rate: Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds.
10.54 am: All the major sectoral indices in the BSE were trading in the red as the BSE Midcap and Smallcap indices lost 1.3 per cent and 1.2 per cent, respectively. Sensex down over 300 points at 25,312. Nifty was down 94 points at 7,701.
10.27 am: Interest sensitive stocks are in focus ahead of the Reserve Bank of India (RBI) fourth bi-monthly monetary policy which is scheduled around 11 am on Tuesday. Most of markets are predicting that the RBI may go for a 25 basis points rate cut this time. In the early trade on Tuesday, the 30-share index was down around 1 per cent at 25,373 at 10 am. BSE Bankex, BSE Auto and BSE Realty were down 1.76 per cent, 1.71 per cent and 1.18 per cent, respectively. Nifty was down 85 points at 7,711.
10.02 am: The rupee fell sharply by 32 paise at 66.37 against the US dollar in early trade today at the Interbank Foreign Exchange due to month-end demand for the American currency from importers. Sensex was down 246 points at 25,370. Nifty was down 79 points at 7,716.
9.27 am: Sensex was down 286 points at 25330. Nifty was down 79 points at 7,716. Nitasha Shankar, vice president, research, YES Securities, said, “The global investors are back to being cautious with worries related to China and overall growth of the global economy. In such a scenario all eyes are turned towards the RBI. Expectations are for a rate cut in the policy meet scheduled to be held today. These expectations were visible in the run up seen in the rate sensitive sectors in the previous trading session.”
9.16 am: Sensex was down over 300 points at 25,307.94. Nifty was down over 1 per cent at 7,712. Vedanta, ICICI Bank, Bharti Airtel, Axis Bank, Hindalco and Tata Steel declined over 2 per cent in the early trade.
Domestic equity markets opened lower on Tuesday tracking weak global cues. Sensex opened 120.46 points down at 25,496.38. Nifty opened 70 points down at 7,725.70.
Interest sensitive stocks are likely to be in focus ahead of the Reserve Bank of India’s (RBI) monetary policy review, which is scheduled around at 11 am. The RBI had kept its benchmark lending rate – the repo rate unchanged at 7.25 per cent in its monetary policy review on August 4.
How has the market reacted to the three previous RBI monetary policy decisions?
On Monday, Sensex closed 246.66 points down at 25,616.84 while Nifty closed 72.80 points down at 7,795.70. Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services, said, “We are in a wait and watch scenario ahead the RBI policy meet on Tuesday. We believe that the market has already considered a rate cut of 25 basis points, hence the commentary will be more important. Given the volatility in the global currency and the likelihood of a US rate hike by Dec-15, the commentary is likely to be hawkish and may not be taken positively by the market.”
(With inputs from agencies)