Sensex trades in red after RBI keeps key rates unchanged

Sensex trades in red after RBI keeps key rates unchanged

Sensex trades in red after RBI keeps key rates unchanged

A benchmark index of Indian equities markets marginally fell by 29.22 points or 0.12 percent in the intra-day trade after the apex bank kept the key policy rates unchanged Tuesday.

The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 24,729.22 points, was trading at 24,655.63 points around 11.20 a.m. session, down 29.22 points or 0.12 percent from the previous day's close at 24,684.85 points.

The Sensex touched a high of 24,795.31 points and a low of 24,626.97 points in trade.

The market, which was already trading cautiously ahead of the Reserve Bank of India's (RBI) bi-monthly monetary policy review, plunged soon after the apex bank left key interest rates unchanged.

This dampened the market's expectations of a rate cut under the new central government to spur economic growth.

The current policy rates are: Bank rate 9.0 percent, repurchase rate 8 percent, reverse repurchase rate 7 percent and marginal standing facility rate 9.0 percent.

While the cash reserve ratio was kept unchanged at 4 percent, statutory liquidity ratio (SLR), which is the quantum of liquid assets banks have to hold against their deposits, has been reduced by 50 basis points to 22.5 percent.

The stance to be adopted by the Reserve Bank was keenly awaited, especially after the formation of a government perceived to be pro-growth at the Centre.

The RBI Governor met Finance Minister Arun Jaitley the day he took charge at North Block and also called on Prime Minister Narendra Modi before the release of data that showed the economy expanded 4.7 per cent in FY14 compared with 4.5 per cent in FY13.

However, the persistence of inflation, especially on the food front, was one of the factors considered detrimental for the RBI in being accommodative in its stance.
Fears of inadequate monsoon rains due to the El Nino factor may only add to price pressures in the future.

Rajan also announced a reduction in liquidity provided under the export credit refinance facility to 32 per cent of eligible export credit outstanding from 50 per cent earlier.

However, it introduced a special term repo facility of 0.25 per cent of net demand and time liabilities to compensate fully for the reduction in access to liquidity under export credit refinance with immediate effect.
The central bank, however, cut the liquidity provided under the export credit refinance facility from 50 percent of eligible export credit outstanding to 32 percent.

This, in effect, reduces the amount of money available to exporters to get credit.

Sector-wise fast moving consumer goods (FMCG), bank and information technology (IT) stocks came under sustained selling pressure.

However, healthy buying was observed in metal, capital goods and consumer durables sectors.

The S&P BSE FMCG index lost 77.19 points, followed by bank index which was down 56.50 points and IT index which decreased by 50.68 points.

However, metal index increased by 208.24 points, capital goods index was up 62.71 points and consumer durables index gained 36.47 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) was trading flat - up only 4.90 points or 0.07 percent at 7,367.40 points.