Rate pause shifts sop onus on government
The surprise pause in rate cuts by the Reserve Bank of India (RBI) in the fifth bi-monthly monetary policy did not lead to any major crash in stock prices on Thursday as investors remained optimistic of a trade deal between the US and China and more fiscal reforms from the Indian government.
However, benchmark indices witnessed a volatile session as they opened in the green on expectations of another rate cut accompanied by a dovish guidance. Sentiments were hit as the monetary policy committee (MPC) opted for a status quo and said that further rate cuts will depend on several factors.
While the 30-share Sensex opened in the green at 40988.14 and hit a high of 41002.41, it fell to a day’s low of 40720.17 — a drop of 130 points.
However, some buying towards the fag end of the session led to the index settling at 40779.59, which was 70.70 points, or 0.17 per cent, lower than the previous close.
Similarly, the 50-scrip NSE Nifty finished with a loss of 24.80 points, or 0.21 per cent, at 12018.40.
Analysts said investors did not dump stocks after the RBI decision because they were now expecting the government to offer fiscal sops in the budget. There are expectations that finance minister Nirmala Sitharaman could lower personal tax rates in early February.
“It is a well-thought unanimous decision of the RBI to give ample time for the transmission of five consecutive rate cuts undertaken since January 2019 and get better clarity on the inflation trajectory,” said Vinod Nair, head of research at Geojit Financial Services.
“With the slowdown in India getting more severe than expected and the RBI cutting real GDP forecast to 5 per cent, we can expect more rate cuts depending on the evolving macro-economic data in the upcoming MPC meetings.
“We don’t expect this decision to completely change the trend of the market except for consolidation in rate-sensitive stocks in the short term,’’ he said.
In the Sensex pack, Bharti Airtel, which had announced a $4-billion fund-raising plan on Wednesday, led the list of losers. It was followed by Tata Steel, IndusInd Bank, HeroMoto Corp and Tata Motors. TCS, ITC, L&T and Infosys were among the gainers, rising up to 2.04 per cent.