Sensex, Nifty recover mildly from sharp fall after RBI’s surprise repo rate move; bank stocks slip

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stock market top gainers, top gainers stock BSE 100 in november 2019, stock market return, best stock performance, economy news, corporate tax cut, rate cut, sensex, nifty, invest in stock market, stock tipsThe Sensex fell more than 120 points to hit the day’s low at 40,738.50, in sharp reaction to the central bank’s decision.

The headline indices recovered mildly from sharp fall in the afternoon trade on Thursday after RBI retained the repo rate at 5.15% amid expectations of a cut. The Sensex is up about 30 points to 40,876. The Sensex fell more than 120 points to hit the day’s low at 40,738.50, in sharp reaction to the central bank’s decision. In a surprise move, the Reserve Bank of India’s Monetary Policy Committee did not cut the repo rate, keeping it unchanged at 5.15%. The MPC statement said that the decisions are in consonance with the objective of achieving the medium-term target for CPI inflation of 4% within a band of +/- 2% while supporting growth. Retail inflation, measured by y-o-y changes in the CPI, increased sharply to 4.6% in October, propelled by a surge in food prices.

WATCH VIDEO | FE Explained: What is RBI Repo Rate? Know about key monetary policy rate

Also read: RBI MPC: Grocery bills to remain higher for this long; will rabi sowing bring relief later?

“Unexpectedly RBI held interest rates unchanged at 5.15% and maintained the policy stance to accommodative. This means we cannot completely rule out rate cut expectations going ahead. Market was expecting a cut of 25bps. This had a negative impact on rupee, and USD/INR rallied after the policy decision,” Rahul Gupta, Head of Research-Currency Emkay Global Financial Services said.

Following the move, Nifty Bank Index was trading with losses. IDFC Frist, RBL, PNB, IndusInd Bank were among the biggest losers in the index, shedding up to 3%. In the Sensex pack, HDFC Bank, Kotak Mahindra Bank, Yes Bank, IndusInd Bank were all trading up to 1% lower. Notably, repo rate is the rate at which the central bank lends money to commercial banks, in the event of shortfall. Repo rate remaining stagnant would mean that these banks will continue to get funds at the same rate as before, wheras the markets were expecting a cut in the rates. 

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