RBI status quo stumps market

Mumbai, December 7

The RBI’s decision to leave interest rates untouched caught the market by surprise as the Sensex switched gear by reversing its two days of gains and cracked 156 points today to close at 26,237.

In his second monetary policy, Reserve Bank Governor Urjit Patel today left the repo rate — at which RBI lends to banks for short term — intact at 6.25% and the cash reserve ratio — the share of deposits lenders park with the central bank — at 4%.

The 30-share index declined by 155.89 points to 26,236.87. The gauge had gained over 162 points in the previous two sessions.

The Nifty hit a low of 8,077.50 before recovering partially to settle at 8,102.05, down 41.10 points. It touched a high of 8,190.45 in early trade.

“Markets traded cautiously along the flat line in the first half of trade today, only to witness a sharp drop after, contrary to market expectations, the RBI kept the repo rate unchanged at 6.25%,” said Karthikraj Lakshmanan, Senior Fund Manager – Equities, BNP Paribas Mutual Fund.

Interest rate-sensitive banking stocks such as SBI, HDFC Bank, ICICI Bank and Axis Bank reacted strongly, all of which fell by up to 2%.

Out of the 30-share Sensex pack, 25 ended lower while only 5 led by Adani Ports, HDFC, Hero MotoCorp, Tata Motors and M&M finished higher, which cushioned the fall. — PTI