Updated June 8th, 2022 at 11:49 IST
Sensex recovers after falling by almost 400 pts amid 2nd repo rate hike by RBI in 2 months
Reacting to the second repo rate hike by the Reserve Bank of India (RBI) in two months, BSE Sensex plunged over 400 points and NSE Nifty tumbled below 16,384.
Advertisement
Sensex fell by almost 400 points and Nifty tumbled to 16,384 after a second repo rate hike by the Reserve Bank of India (RBI) in two months. However, Sensex recovered with a jump of 200 points and Nifty over 16,450 as VIX eased by 4%.
Earlier, the Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said that the Monetary Policy Committee (MPC) raised the repo rate raising the key lending rate by 50 points to 4.90% to tackle the growing inflation. The Standing Deposit Facility, representing the lower band of the interest rate corridor, was previously raised to 4.65% from 4.15%.
Das also noted that the MPC is committed to decreasing the Consumer Price Inflation back to target and has even unanimously voted to focus on withdrawal of accommodation. It is to note here that MPC’s rate action came in line with the expectations of the market.
In the immediate impact of RBI policy, Sensex fell nearly 400 points and the ten-year bond yield became the highest since March 15, 2019. Eventually, the Nifty recovered as RBI retained Fiscal Year 2023 GDP. It is to note here that most bank stocks, following the announcements made by Das on Wednesday, most bank stocks trade were in the green.
Realty stocks also gained on RBI’s decision including the top five gainers Oberoi Realty Ltd, DLF Ltd, Sobha Ltd, Brigade Enterprises Ltd, and Godrej Properties Ltd.
#LIVE | Limits for individual housing loans extended by urban cooperative banks&rural cooperative banks being revised upwards by over 100% taking into account increase in house prices. It'll facilitate better flow of credit to housing sector: RBI Governorhttps://t.co/hBNv8QrX25 pic.twitter.com/tqauDuJPJA
— Republic (@republic)
Das: CPI inflation would remain above RBI’s 2-6% band
Noting that the inflationary pressures are becoming broad-based, RBI Governor said that the CPI inflation would remain above RBI’s 2-6% band for the first three quarters of the current fiscal year. According to him, more monetary policy measures are essential in order to stem the expectations of the growing inflation, which continues to remain above its comfort level.
Das said that the recent measures taken by the government including cuts in fuel excise duty have led to a significant plunge in household inflation expectations. It is pertinent to mention here that the CPI inflation had increased to an eight-year high of 7.79% in April, which was significantly greater than MPC’s mandated range of 2-6%.
RBI also announced a steep increase in inflation projections with CPI inflation for the current financial year at 6.7%. Das said CPI inflation is seen at 7.5% in April-June, 7.4% in July-September, 6.2% in October-December and 5.8% in January-March.
#LIVE | According to the provisional estimates released by the National Statistical Office, India's GDP growth ins 2021-22 is estimated at 8.7%. This level of real GDP in 2021-22 has exceeded pre-pandemic, i.e., 2019-20 level: RBI Governor Shaktikanta Dashttps://t.co/hBNv8QrX25 pic.twitter.com/nfYSKZfx2j
— Republic (@republic)
Image: RBI
Advertisement
Published June 8th, 2022 at 11:39 IST