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Markets continued to trade on a volatile note, albeit off the day's low. The Sensex rebounded into the positive zone but slipped soon after to trade at 19,674 - down 61 points. The Nifty is down 18 points at 5,981.
The Reserve Bank of India cut its policy interest rate by 25 basis points on Friday for the third time since January, as expected, as growth slows and inflation ebbs, but said there is little room to ease monetary policy further.
The RBI trimmed the repo rate to 7.25%, its lowest since May 2011, and kept the cash reserve ratio (CRR) for banks unchanged at 4%, also in line with expectations.
C Rangarajan, chairman PMEAC C Rangarajan, Chairman of Prime Minister’s Economic Adivsory Council (PMEAC) has welcomed the RBI's decision stating, "I think it is a good decision they have taken to reduce the policy rate by 25 bps".
Banking stocks are under pressure after the Reserve Bank of India (RBI) said there is little room to ease monetary policy further. State Bank of India, Punjab National Bank, Canara Bank, Union Bank of India, Karnataka Bank and Dena Bank are down more than 3% each on the Bombay Stock Exchange (BSE).
The BSE banking index, Bankex is down 1.7% or 252 points compared to 0.56% fall in benchmark Sensex at 1117 hours.
RBI has warned that the risk of inflationary pressure persists despite a recent sharp decline in wholesale price index (WPI) inflation, and said a high current account deficit poses the biggest risk "by far" to the Indian economy.
The BSE auto index is down 0.7% at 10,920. On the other hand, the capital goods and IT indices have bucked trends and moved up around 1% each. The rupee today lost 17 paise to 53.98 against the dollar in early trade on the Interbank Foreign Exchange market due to appreciation of the US currency against other currencies overseas. The dollar's movement affects the IT index as US is the biggest market for the IT service industry.
