Stock market benchmark indices Sensex and Nifty rose on Friday after the Reserve Bank of India (RBI) cut key benchmark interest rates for the first time in six months. Also, steps were taken to increase liquidity to support the ‘Goldilocks’ economy in the wake of higher US tariffs. Gaining for the second consecutive day, the 30-share BSE Sensex closed at 85,712.37 points, up 447.05 points or 0.52 percent. During trading it increased by 531.4 points or 0.62 percent to reach 85,796.72 points. The 50-share NSE Nifty rose 152.70 points or 0.59 per cent to 26,186.45. Rupee fell 10 paise to close at 89.99 (provisional) against the dollar.
RBI cuts repo rate by 0.25 basis points
The six-member Monetary Policy Committee, headed by RBI Governor Sanjay Malhotra, unanimously voted to reduce the repurchase or repo rate by 25 basis points to 5.25 percent and maintained a neutral stance, leaving scope for further rate cuts. By doing this the RBI has ignored concerns about the fall in the rupee, which crossed the 90-dollar mark this week. The RBI has reduced the inflation forecast for the financial year till March from 2.6 per cent to 2 per cent, while the GDP growth forecast has been raised from 6.8 per cent to 7.3 per cent.
Condition of Sensex companies
Among Sensex companies, State Bank of India, Bajaj Finserv, Bajaj Finance, Maruti, HCL Tech, Larsen & Toubro, Mahindra & Mahindra and Infosys were the major gainers. However, Hindustan Unilever, Eternal, Tata Motors Passenger Vehicles and Sun Pharma were among the laggards. Interest rate sensitive stocks like bank, auto and realty remained on the rise.
RBI decision boosted market sentiment
Vinod Nair, Head of Research, Geojit Investments Ltd, said Indian markets have reacted enthusiastically to RBI’s unexpected 25 basis points interest rate cut. The move seemed unlikely given the strong second-quarter GDP data. This unexpected cut, along with lower inflation expectations and supportive liquidity measures, have boosted risk-on sentiment across the stock market. Interest rate sensitive sectors like auto, real estate and NBFC are leading the gains due to reduction in costs.
Decline seen in Asian markets
In Asian markets, South Korea’s Kospi, Shanghai’s SSE Composite index and Hong Kong’s Hang Seng index closed in positive territory, while Japan’s Nikkei 225 index closed with losses. European markets were trading with gains. US markets closed without any changes on Thursday.
The price of Brent crude increased to $ 63.36 per barrel.
Global oil benchmark Brent crude rose 0.16 percent to $63.36 a barrel. According to exchange data, foreign institutional investors (FIIs) sold shares worth Rs 1,944.19 crore on Thursday, while domestic institutional investors (DIIs) bought shares worth Rs 3,661.05 crore. On Thursday, the Sensex closed 158.51 points or 0.19 per cent higher at 85,265.32. Nifty closed at 26,033.75, up 47.75 points or 0.18 percent.
