InvestorQ : With RBI rate cut to just 25bps, what is the market reaction to it?
Priyanka Singh made post

With RBI rate cut to just 25bps, what is the market reaction to it?

Answer
user profile image
1 year ago


Too small to have any major impact.


user profile image
Roshni Hegde answered.
1 year ago


The awaiting rate cut by 25 basis points (bps) gave mixed feelings amongst investors in the Indian market. However, somewhere with the hopes of rate cut up to 75bps marked disappointment to the market at a length. For the third time, the central bank has announced a rate cut.

Repo rate is now 5.75% from 6% similarly, the reverse repo rate is now 5.50% from 5.75%.

Direct benefits through rate cut: Repo is considered vital for the Indian market as based on which the central bank lends to commercial lenders. The drop in the rate gives a direct benefit for corporates, individual borrowers having borrowed funds.
All EMI (equated monthly installments) payers or those borrowers will be having a quite good time with reduced rates assuming the banks will pass the benefit of the rate cut.

Rate impact on the market: Since 12th hour of the market hours today the Sensex was running down to nearly 198.60 points at 39,884. Nifty was also down with around 78.20 points at 11,943.
A recent report disclosed total shares around 817 have advanced and 1375 shares were declined, and 127 shares remained unchanged.

Market experts: Bank nifty did not show much effect with overall half % change. The top losers among bank Nifty are seen in stocks of Bank of Baroda, Federal Bank, IndusInd Bank, YES Bank, State bank of India, IDBI Bank, Syndicate Bank. 
While Nifty Auto stocks of Apollo Tyres, Eicher Motors, Maruti Suzuki, Motherson Sumi Systems and Exide Industries will most likely to land up as top gainers today. 

However, Nifty Realty with stocks like Indiabulls Real Estate, Oberoi Realty, Mahindra Life, Prestige Estates is also keeping parallel reaction with the experts' expectation of trading in the green for the day.


Bonus point:
Reasons why the Monetary Policy Committee had to conclude rate cut- Indian economic growth showed a sloping growth to a 20-quarter low of nearly 5.6% in Q4FY19. Due to the country's liquidity crises, it reflected on weak consumption for many months.
Also, another major reason is crude oil which stayed volatile with $60-70 a barrel.