RBI move disappoints markets
- âWonât be vindictive... will ask Supreme Court to clear MP, MLA cases in a yearâ
- Alagiri backs âgreat manâ Modi as PM
- Plea to vote for âsecular partyâ splits Bollywood
- âWe gave instant justice, todayâs youth canât stand up for their mothersâ
- Elections 2014 LIVE: Biggest phase of voting kicks off across 121 seats in 12 states
Largely weighed by interest-rate sensitives, Indian benchmark equity indices declined more than 1% on Tuesday to a five-week low after the Reserve Bank of India dashed market expectations for lower interest rates. The central bank kept interest rates unchanged and instead reduced the cash reserve ratio (CRR) by 25 basis points, even as the market and the government were hoping for a significant cut in interest rates following a series of fiscal measures adopted by the Centre to boost growth.
The 30-share Sensex ended the day at 18,430.85, down 204.97 points or 1.10% from its Monday close, while the Nifty ended at 5,597.90, down 67.70 points or 1.19% from the previous close. Both indices posted their biggest single-day fall since October 8. Shares of public sector banks were the biggest losers, with the Bank Nifty falling 2.35% and NSE PSU Bank index plunging over 4%.
Experts said that RBI's decision to increase provisioning for restructured loans to 2.75% from 2% was the most disappointing as increased provisioning would negate the cut in CRR and have a significant impact on banks' profitability. For instance, SBI, which would see its cash balance relax by R200-220 crore after the CRR cut, will now have to keep around R300 crore as provisioning.
Broader markets also reflected the fall in benchmarks as the NSE CNX Midcap and CNX Smallcap indices declined 1.08% and 1.34%, respectively. As per data available on the BSE and NSE, total market turnover in the cash and derivatives segment stood at R1.69 lakh crore. Further, volatility — measured by India VIX or the fear index — soared over 2% during market hours after it fell to historical lows last week.
RBI's cautious stance to leave interest rates unchanged also disappointed the government with finance minister P Chidambaram stating that growth is as much a challenge as containing inflation and the government would "walk alone" to face the challenge if it comes to that.
- Activist, her aide booked for cheating in attempt to frame acquitted murder accused
- Extended Monorail running hours fails to pull crowd
- HC orders action against Essel World for causing harm to mangroves
- Cops crack bar girl’s murder case after waiter’s tip-off
- Railway to provide plastic pouches for commuter IDs
- Last safety check for Metro to begin April 18