RBI's repo rate announcement: Sensex falls by 218 points

Mindy Sparks
December 7, 2017

Keeping one eye on inflation and rising global headwinds, the Reserve Bank of India (RBI) on expected lines chose to keep rates on hold for now in its fifth Bi-monthly monetary policy statement released on Wednesday.

"It is unlikely that the RBI will move in the February policy too, given the inflation trajectory which is likely to peak in June 2018". "We are hopeful that going forward the RBI would shift its policy stance from neutral to accommodative and effect a cut in interest rates to revive domestic demand, which would provide a fillip to broad-based investment activity which has yet to take off in a big way", said CII Director General (DG) Chandrajit Banerjee. While some feel the central bank is unduly obsessed with inflation, its reason for holding rates do merit attention.

The Sensex, which had lost 100 points in early trade, continued its slide and fell 217.78 points, or 0.66 per cent, to 32,584.66. "They don't seem to favour a rate cut going forward".

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 benchmark BSE Sensex dropped 205.26 points or 0.63 percent to 32,597.18 while the broader Nifty index ended down 74.15 points or 0.73 percent at 10,044.10.

Punjab National Bank is now trading at Rs171.35, down by Rs4.65 or 2.64% from its previous closing of Rs176 on the BSE.

In sync with overall trend, the rupee too weakened to quote at 64.55 against the dollar intra-day.

Reserve Bank of India Governor Urjit Patel on Wednesday said that the planned Rs 2.11 lakh crore fund infusion for state-run banks is not only a recapitalisation package, but to ensure that the seeds of boom-and-bust-lending cycle is not sown in future.

The mid-cap index shed 0.89% and small-cap declined 0.66%. The banks are also required to raise about 580 billion rupees by selling shares to external investors.

Asian markets retreated, with Japan's Nikkei falling 0.37%, Hong Kong's Hang Seng declining 1.01% and Shanghai Composite Index finishing 0.18% lower. London's FTSE rose 0.16% in late morning deals.

Other reports by Iphone Fresh

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