 "Provisional: Markets end lower as RBI disappoints")
Markets recovered some of its losses in late trades, amid a volatile trading session on Friday, after the RBI governor Raghuram Rajan indicated the marginal standing facility rate would be lowered more than the quantum of repo rate hikes.
Post the policy announcement markets plunged after the Reserve Bank of India stunned the market by hiking repo rate by 25 basis points to 7.5% citing inflationary pressures while announcing a sharp cut in MSF (Marginal Standing Facility) rate by 75 basis points to 9.5%.
The 30-share Sensex ended down 360 points at 20,286 and the 50-share Nifty ended down 103 points at 6,012..
Repo rate is the rate at which RBI lends to commercial banks generally against government securities. The increase in the Repo rate will increase the cost of borrowing and lending of the banks which will discourage the public to borrow money and will encourage them to deposit.
What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence. Although better prospects of a robust kharif harvest will lead to some moderation in CPI inflation, there is no room for complacency, the RBI said.
Post the policy announcement markets plunged after the Reserve Bank of India stunned the market by hiking repo rate by 25 basis points to 7.5% citing inflationary pressures while announcing a sharp cut in MSF (Marginal Standing Facility) rate by 75 basis points to 9.5%.
The 30-share Sensex ended down 360 points at 20,286 and the 50-share Nifty ended down 103 points at 6,012..
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On Thursday, the Sensex ended 684 points higher at nearly 3-year high recoding its biggest single day gains since May 2009 in absolute terms. The 50-share Nifty added 216 points at 6,116 levels.
Repo rate is the rate at which RBI lends to commercial banks generally against government securities. The increase in the Repo rate will increase the cost of borrowing and lending of the banks which will discourage the public to borrow money and will encourage them to deposit.
What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence. Although better prospects of a robust kharif harvest will lead to some moderation in CPI inflation, there is no room for complacency, the RBI said.