Sensex increases by modest 91 points

Stocks ended in the green for the third day on Tuesday as the benchmark Sensex rose over 91 points after rate-sensitive stocks broke free on RBI’s surprise decision to cut policy rate by 0.25 per cent to 6.25 per cent, a 6-year low.  

In the first monetary policy review under RBI Governor Urjit Patel, the repo rate was today cut by 0.25 per cent to 6.25 per cent in a unanimous decision by the new rate-setting panel, or MPC.

The cut first in six months came amid growing calls for lower rates, especially after the exit of former governor Raghuram Rajan, who had faced criticism of stifling growth by keeping rates too high.Globally, shares at other Asian and European markets ended higher after an upbeat US manufacturing survey bolstered the dollar.

The 30-share index, which had gained over 160 points in the opening trade ahead of the RBI action, gave up most gains to touch a low of 28,242.25 as investors preferred to book profits. The 30-share barometer closed the day up 91.26 points, or 0.32 per cent, at 28,334.55.

The 6-member Monetary Policy Committee, headed by Patel, reduced the repo ratethe short-term rate at which central bank lends to banks to 6.25 per cent.

Consequently, the reverse repo rate has also come down by a similar percentage point to 5.75 per cent.