The Reserve Bank of India in its June policy has cut repo rate by 35 bps to 5.4 percent. The Reverse repo has been cut to 5.15 percent. RBI has revised downwards the real GDP growth for 2019-20 from 7 percent in the June policy to 6.9 percent.
Four MPC members (Ravindra H. Dholakia, Michael Debabrata Patra, Bibhu Prasad Kanungo and Shaktikanta Das) voted to reduce the policy repo rate by 35 basis points, while two members (Chetan Ghate and Pami Dua) voted to reduce the policy repo rate by 25 basis points.
The Central Bank has decided to raise a bank’s exposure limit to a single NBFC to 20 percent of Tier-I capital of the bank.
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The Indian benchmark indices are trading flat with Nifty down 6 points to 10,942 while the Sensex is up 9 points and is trading at 36,986.
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"RBI has today demonstrated boldness by an unconventional reduction of 0.35% showing an urgent need to take pressure off the bond markets and reduce the cost of capital in the economy to kickstart the investment cycle from the private sector. Increasing the bank exposure limit to a single NBFC from 15 percent to 20 percent is indeed RBI’s way of managing the current crises thereby addressing the liquidity squeeze caused by the NBFCs. The policy will genuinely percolate liquidity into the system giving immediate relief to the economy," said Jimeet Modi, Founder & CEO at Samco Securities.
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Nifty Auto continues to trade in the red despite interest rate cut dragged by Bosch, Eicher Motors, Mahindra & Mahindra, Tata Motors, Tata Motors DVR and Motherson Sumi Systems.
Bank Nifty is up in the green led by YES Bank, ICICI Bank, IndusInd Bank, IDFC First Bank and Federal Bank. The stocks which are dragging the index are PNB, RBL Bank, Axis Bank and Bank of Baroda.
Nifty Realty is trading on a flat to positive note. The top gainers are Prestige Estates, Sobha, Phoenix Mills and Godrej Properties while the top losers are Indiabulls Real Estate which tanked over 14 percent followed by Sunteck Realty.
India VIX is up 0.68 percent and is trading at 16.23 levels.
“The RBI continued with the rate cut cycle but in a surprise change to the quantum, reduced repo rate by 35 bps. While this induces some uncertainty in market expectations of the quantum of rate changes, it provides the RBI MPC with a greater degree of flexibility in signalling their intent," Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities told Moneycontrol.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more. First Published on Aug 7, 2019 12:00 pm