DSIJ Mindshare

RBI Surprises With 25 Basis Rate Cut

In the reserve bank’s surprise move, the reserve bank has cut the repo interest rate by 25 basis points to 7.5 per cent on Wednesday morning. This was the second time in the year that the central bank has cut the repo rate before its bi-monthly review meeting. This seems that the reserve bank and the government are simultaneously working complementary to the country’s growth. 

The reserve bank in its statement said, “Softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation.”

The market gave big thumps up to this surprise move with almost one per cent gains on the bourses. The BSE Sensex breached the dream figure of 30000 and touched an intraday high of 30024.74 after the announcement in early trades. The NSE Nifty too touched its life time high of 9119.20 in early trades. The banking stocks which are the direct beneficiary of the rate cut soared on the bourses and the Banknifty touched its lifetime high of 20541.65 in the morning. 

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