Eight realty shares declined by 0.52% to 5.54% at 12:45 IST on BSE, extending Friday's fall as the Reserve Bank of India, in a surprise decision, raised its key policy rate after a monetary policy review on Friday, 20 September 2013.
The BSE Realty index lost 3.48% to 1,242.38. It underperformed the BSE Sensex which was down 1.76%, to 19,908.03. The BSE Realty index had declined 6.53% to 1,287.12 on Friday, 20 September 2013.
Orbit Corp (down 3.43%), Godrej Properties (down 2.64%), Housing Development & Infrastructure (HDIL) (down 4.5%), Indiabulls Real Estate (down 3.94%), Unitech (down 4.06%), Sobha Developers (down 0.52%), Parsvnath Developers (down 2.27%), DLF (down 5.54%) and Oberoi Realty (down 0.85%) dropped.
Real estate stocks fell for second day in a row on worries higher interest rates may dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance.
The Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on Friday, 20 September 2013, and as the central bank retained hawkish tone at the latest monetary policy review.
Dr. Raghuram G. Rajan, Governor, Reserve Bank of India, said in a statement on Friday, 20 September 2013, that the calibrated withdrawal of the exceptional measures that the RBI had taken since mid-July to tighten liquidity with a view to dampening volatility in the foreign exchange market will provide a boost to growth, reduce the financing distortions that are emerging in the market and reduce the strain on corporate and bank balance sheets. In an attempt to tame high inflation, which is partly fueled by the currency's recent slump against the dollar, the RBI raised its policy rate viz. the repo rate after a monetary policy review on Friday, 20 September 2013. The central bank, however, eased some of the liquidity-tightening measures it had taken to prop up the rupee. The RBI reduced the rate at which it lends funds to banks through its marginal standing facility, by three quarters of a percentage point, to 9.5%. The marginal standing facility is an emergency funding facility for banks. On net, the RBI's latest measures will reduce the cost of bank financing substantially while allowing the RBI to take an appropriately precautionary stance on inflation, Dr. Rajan said on Friday, 20 September 2013.
The minimum daily maintenance of the CRR prescribed by the Reserve Bank of India (RBI) has been brought down from 99% of the requirement to 95% from the fortnight beginning 21 September 2013. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way, the RBI said after a monetary policy review. However, any further change in the minimum daily maintenance of the CRR is not contemplated, the RBI said. The RBI kept the cash reserve ratio (CRR) unchanged at 4%.
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