Stocks
Worryingly, for bulls, Nifty, Sensex hardly respond to a 50 bps cut in interest rate - Tuesday closing report
For an uptrend, Nifty has to close above 8,000 
 
We had mentioned in Monday’s closing report that Nifty, Sensex are in a no-man’s land ahead of RBI’s (Reserve Bank of India) rate cut decision. We had also mentioned that Nifty has to close above 7,850 for any uptrend.  Today, the RBI surprised the market by a 0.5% cut in interest rate. However, the market hardly responded to it. There was a strong immediate rally, but this could not be sustained. By the close of trading, the major indices closed with just 0.5%-1% gains.
 
 
The RBI on Tuesday cut repo rate (the rate at which the RBI lends money to banks) by 50 basis points to 6.75% from 7.25% with immediate effect. At the same time, the central bank has made a pitch for passing the rate cut on to consumers in the form of cheaper personal and commercial credit.  The cash reserve ratio (CRR) has been kept unchanged at 4% in the fourth bi-monthly policy review by RBI.
 
However, the market which was clamouring for a rate cut was surprisingly ambivalent about it after it actually got one. Uncertainty over the rate cut decision, fears of a hawkish economic outlook and bank's ability to transmit the easing of monetary policy kept the bellwether indices subdued. The indices had opened deeply in the red, following a huge decline in US markets last night and Asian markets this morning. After the rate cut, the equity indices staged a recovery on the back of an unexpectedly high interest rate cut but strong selling took over later in the last half hour.
 
The markets were elated after the monetary easing announcement, and zoomed into the positive territory, seconds after RBI Governor Raghuram Rajan's announcements of a 50 basis points reduction in key lending rates. The easing of key lending rates was expected to restore investors' confidence, prop up sales of interest in sensitive sectors like automobile, capital goods and real estate. Notwithstanding the more than expected easing, the markets fell on the concerns over the diminished prospects of future rate cuts and disappointing outlook on domestic and global economic scenario.
 
The RBI revised its growth forecast to 7.4% from 7.6% and gave cues about firming up of inflationary trends. However, both the indices soon pared their losses and were back in the green.
 
The top gainers and top losers of the major indices in the stock market are given in the table below:
 
 
The closing values of major indices in the Asian market are given in the table below:
 

User

RBI feels growth trends require more aggressive stimulus: Moody's
Describing the Reserve Bank of India's 50 basis points cut in its short term lending rate as more than what markets expected, international credit ratings agency Moody's on Tuesday said the move indicates the RBI wanted to give an "aggressive stimulus" to subdued growth trends.
 
"The 50 basis point cut in the repo rate was higher than the market expectation of 25 basis points. This suggests that the RBI sees underlying growth trends as subdued enough to require more aggressive stimulus," Moody's Investors Service associate managing director Atsi Sheth said in a statement.
 
The RBI on Tuesday cut its repo rate, at which it lends to commercial banks, by 50 basis points, but made a pitch for passing it on to consumers in the form of cheaper personal and commercial credit. Stakeholders expected a 25-basis-point cut.
 
While the repurchase rate, or the interest charged on short-term borrowings, stands cut to 6.75 percent, it will take commercial banks to lower their own lending rates for personal, automobile, housing and commercial loans, translating into lower EMIs.
 
"The economic impact of the cut will depend on the speed and extent to which it translates into lower borrowing costs for households and investors," Sheth said.
 
Fears over deficient rains in the current monsoon season and gradual progress of reforms had prompted Moody's last month to lower India's growth forecast for this year by 50 basis points to 7 percent.
 
"We have revised our GDP growth (for India) forecast down to around 7 percent in light of a drier than average monsoon although rainfall was not as low as feared at the start of the season," it said in its latest "Global Macro Outlook 2015-16" released on Tuesday.
 
"One main risk to our forecast is that the pace of reforms slows significantly as consensus behind the need for reform weakens once the least controversial aspects of the government's plan have been implemented," it said.
 
One such reform, as indicated above, is the introduction of a pan-India goods and services tax regime, which is a lengthy process -- beginning with an amendment to the Constitution and approvals by at least 15 states.
 
Welcoming the RBI's decision, Finance Minister Arun Jaitley said on Tuesday this will support growth while showing that inflationary pressures were now moderating.
 
"Today's rate cut will boost investment and growth. We are looking forward now to the transmission of these cuts, which will help boost economy and confidence," the finance minister said in New Delhi.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

Passing RBI rate cut to borrowers may take 1 or 2 quarters: Official
Passing the Reserve Bank of India's 50 basis point rate cut by commercial banks to their borrowers may take around one or two quarters, a top official of City Union Bank said on Tuesday.
 
"The direction and the quantum of rate reduction are clear. What remains is the timing for the banks to pass on the rate cut to their borrowers," N. Kamakodi, managing director and CEO of City Union Bank, told IANS.
 
He said reduction in bank interest rates on deposits will also take one-three months.
 
Kamakodi dubbed the RBI's cut on short-term lending rate to banks by 50 basis points as a "pleasant surprise" as the industry was expecting cut of only around 25 basis points.
 
According to Kamakodi, the bank's lending rate was determined by demand and supply.
 
"The growth of deposits has overtaken credit growth now. Some banks have already reduced their lending rates by quarter to half percent, based on the earlier rate cuts by the RBI," Kamakodi said.
 
RBI Governor Raghuram Rajan, in his fourth bi-monthly monetary policy statement for the current fiscal, said the markets/banks have passed on the earlier rate cuts only to a limited extent.
 
"Median base lending rates of banks have fallen by only about 30 basis points, despite extremely easy liquidity conditions," the governor said.
 
"It is a fraction of the 75 basis points of the policy rate reduction during January-June, even after the passage of eight months, since the first rate reduction by the Reserve Bank. Bank deposit rates have, however, been reduced significantly, suggesting further transmission is possible."
 
Kamakodi said the RBI has till date cut the policy rate by 1.25 percent and some banks have already cut their lending rates.
 
He said there will not be much of a difference between public and private banks in their lending rate reductions but the timing of the reduction may vary.
 
Kamakodi said the banking sector is expected to log a credit growth of around 10-13 percent this fiscal.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)