Shares of rate sensitive sectors traded mostly higher on the bourses after the Reserve Bak of India (RBI) raised the policy repo rate by 50 basis points (bsp) to 5.9 per cent in its monetary policy review on Friday. This is the fourth hike in repo rate in the current financial year. In its Monetary Policy Committee meeting (MPC), the RBI decided to withdraw accodative stance while supporting growth.
Financial indices includes Nifty Bank, Nifty Financial Services, Nifty PSU Bank and Nifty Private Bank index rallied nearly 1 per cent each, as compared to 0.46 per cent rise in the Nifty 50 on the National Stock Exchange (NSE) at 10:34 AM. Among others, the Nifty Auto and Realty indices were up 0.10 per cent and 0.44 per cent, respectively.
Among the individual stocks, Kotak Mahindra Bank, HDFC Bank, Axis Bank, State Bank of India, HDFC, ICICI Bank, SBI Life Insurance and SBI Cards from the Nifty Financial index gained up to 2 per cent each.
Meanwhile, RBI retained its Consumer Price Index (CPI)-based inflation forecast of 6.7 per cent for the current financial year, while stating for the coming quarters as: Q2 7.1 per cent, Q3 6.5 per cent, and Q4 5.8. For the first quarter of the next financial year, the CPI infation is pegged at 5 per cent.
The Reserve Bank’s enterprise surveys point to some easing of input cost and output price pressures across manufacturing, services and infrastructure firms; however, the pass-through of input costs to prices remains incomplete. Taking into account these factors and an average crude oil price (Indian basket) of US$ 100 per barrel, the Central Bank said in Monetary Policy statement.
On the demand side, urban consumption is being lifted by discretionary spending ahead of the festival season and rural demand is gradually improving. Investment demand is also gaining traction, as reflected in rising imports and domestic production of capital goods, steel consumption and cement production. Merchandise exports posted a modest expansion in August. Non-oil non-gold imports remained buoyant, RBI said.