Shares of rate sensitive sector stocks such as banking, auto and realty are trading lower after the Reserve Bank of India (RBI) kept key policy rates unchanged in its April-June quarter monetary policy review.
The RBI, on Tuesday, kept the repo rate or the rate at which banks borrow from RBI unchanged at 8% and also the reverse repo rate at which, the banks lend to RBI unchanged at 7%. However, it has lowered the statutory liquidity ratio (SLR) to 23% from 24% earlier.
SLR is the percentage of total deposits that lenders need to invest in the government bonds. The reduction is aimed at ensuring free flow of credit growth through enough liquidity in the system. Cash Reserve Ratio or CRR is the portion of total deposits that banks are required to keep with the central bank also remained unchanged
“The primary focus of monetary policy remains inflation control in order to secure a sustainable growth path over the medium-term. While monetary actions over the past two years may have contributed to the growth slowdown – an unavoidable consequence – several other factors have played a significant role,” RBI said in a release.
In the current circumstances, lowering policy rates will only aggravate inflationary impulses without necessarily stimulating growth. As the multiple constraints to growth are addressed, the Reserve Bank will stand ready to act appropriately, it added.
Among the individual stocks,State Bank of India, Bank of Baroda and Central Bank of India from banking, Indiabulls Real Estate, GMR Infrastructure and Unitech from infrastructure and realty, and Hero MotoCorp, Tata Motors and Mahindra and Mahindra from auto sectors are down 1-3% on the Bombay Stock Exchange.