RBI keeps repo rate unchanged at 6%, maintains neutral stance

Lloyd Doyle
December 7, 2017

The Reserve Bank made a decision to hold the policy rate, on expected lines, but raised inflation forecast for the remainder of 2017-18 to 4.3-4.7 per cent.

The broader NSE Nifty too slipped by 9.50 points, or 0.09%, to end at 10,118.25, after moving between 10,069.10 and 10,147.95.

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday kept the short-term lending rate, also known as repo rate, unchanged at 6 per cent in its fifth bi-monthly policy review of the fiscal year.

BSE Bankex which constitutes 10 key banking stocks from the BSE 500 was trading 114 points or 0.40 percent lower at 28,345 level. It had touched a high of 10,104.20 in early trade.

India's benchmark 10-year bonds gained on Wednesday after the central bank stuck to a more balanced tone on inflation and market liquidity, in a relief to investors who had braced for more hawkish comments.

Following the announcement, stock of Kotak Mahindra Bank today settled down 0.06 per cent while Yes Bank declined 0.76 per cent, State Bank of India 2.21 per cent, Federal Bank 0.23 per cent, Punjab National Bank 2.24 per cent and Bank of Baroda 2.27 per cent.

The MPC sounds a bit hawkish when it says that the evolving inflation trajectory needs to be carefully monitored due to rising input costs pointing towards high risk of pass-through to retail prices, implementation of farm loan waivers by select states, partial roll back of excise duty and Value-Added Tax for petroleum products and decrease in revenue due to lower GST rates resulting in fiscal slippage with related implication for inflation.

Other losers included Tata Steel, NTPC, Dr Reddy's, ONGC, Power Grid, Bajaj Auto, L&T, M&M, Asian Paints, HDFC Bank, HUL, Lupin, Coal India, ITC, Tata Motors, Axis Bank, Maruti Suzuki and Infosys, falling by up to 1.71 per cent.

Meanwhile, foreign portfolio investors offloaded shares worth net Rs 333.59 crore, while domestic institutional investors (DIIs) bought shares to the tune of Rs 776.18 crore on Tuesday, as per provisional data.

The Nifty PSU Bank was biggest loser among sectoral indices, falling almost 2 percent. It was last in August 2017 that the central bank had cut the repo rate by 0.25 per cent from 6.25 per cent to 6 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.9 percent. London's FTSE rose 0.16% in late morning deals.

Other reports by Iphone Fresh

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