Markets give thumbs up to RBI 'status quo' interest rate policy
Buoyed by the RBI's status quo on policy rates and a revised estimate of a good monsoon, the BSE Sensex today closed almost 81 points higher at 31,271.28 with sectors like banking and auto making most of the gains. The strengthening rupee, which closed 10 paise up at 64.33, also pepped up domestic equities.
The central bank left lending rates unchanged citing risks to inflation due to spurt in farm loan waivers by states but raised lending capacity of banks to support economic growth.
RBI Governor Urjit Patel-led MPC for the fourth straight bi-monthly review kept the repo rate unchanged at 6.25 per cent. The reverse repo has been kept at 6 per cent.
"The market was volatile as the policy decision was consistent with their neutral stance, whereas investor expected a change. The policy will support banks to lend more due to the advantage of 50bps cut in SLR. Moreover, revised estimation of monsoon to 98% will increase the consumption patterns which also provide a positive sentiment to investors. Vinod Nair, Head of Research, Geojit Financial Services Ltd said.
The BSE Sensex took off on a positive note at 31,252.71 and advanced to 31,346.99. Later, on profit booking, it slipped to touch a low 31,172.98 before ending 80.72 points, or 0.26 per cent, higher at 31,271.28. The gauge had lost 118.93 points in the previous session.
The NSE Nifty too followed suit. After shuttling between 9,678.55 and 9,630.55, it finally settled 26.75 points higher at 9,663.90.
The markets also cheered the Met department's revised monsoon estimate which said that the country will get 98 per cent rainfall of the Long Period Average, up from the earlier estimate of 96 per cent. Brokers said the RBI's decision to keep key interest rate unchanged was largely in line with investor expectations.