A rate cut by 25 basis points by the Reserve Bank of India (RBI) Governor Raghuram Rajan failed to lift rate sensitive stocks on Tuesday
A rate cut by 25 basis points by the Reserve Bank of India (RBI) Governor Raghuram Rajan failed to lift rate sensitive stocks on Tuesday as the BSE Bankex, BSE Realty and BSE Auto closed in red post the announcement. Repo rate is the rate at which RBI lends to the financial system.
The cut was broadly in line with market expectations. However, rate sensitive stocks reacted negatively as the BSE Bankex, BSE Realty index and BSE Auto index tumbled 3.21 per cent, 2.59 per cent and 2.82 per cent respectively. The BSE Sensex plunged over 500 points on Tuesday.
In the banking space, all the 10 stocks in the Bankex ended the day below the neutral line. ICICI Bank and State Bank of India slid over 5 per cent and were among the top losers in the space. Punjab National Bank, Bank of Baroda and YES Bank closed down by 4.61 per cent, 6.60 per cent and 4.42 per cent respectively.
Rajan also took a host of measures on the liquidity front, starting with the narrowing of the policy rate corridor to 0.50 per cent from the earlier 1 percentage point, which resulted in the reverse repo rate – at which banks can park excess funds with the RBI – being reset at 6 per cent.
Among real estate stocks, Indiabull Real Estate, HDIL and DLF closed down by 6.41 per cent, 4.99 per cent and 4.51 per cent respectively.
Post budget, the BSE Sensex surged 10.42 per cent to 25,399.65 till April 4. Rate sensitives BSE Auto, BSE Bankex and BSE Realty surged 14.13 per cent, 16.66 per cent and 19.60, respectively, during the same period.