Following a poor start to Friday's trading, Indian equities indices have now moved back into positive territory. In late-morning trading today, the benchmark 30-share BSE Sensex pack and the larger NSE Nifty both increased by 0.10 percent.
Other rate-sensitive sectors, including as Nifty Auto, rose 0.62%, led by Samvardhana Motherson, Bajaj Auto, and Eicher Motors, while Nifty Financial Services increased 0.25%. However, Nifty Realty fell 0.2%.
Among individual equities, Ola Electric shares fell more than 2% after the central consumer protection regulator requested additional information from the company about the suspected whitewashing of over 10,000 customer complaints.
Garden Reach Shipbuilders & Engineers (GRSE) shares rose roughly 3% after the company signed a contract for the building and delivery of multipurpose boats.
Due to "high inflation," the Reserve Bank of India (RBI) maintained key interest rates at the same time as the increase. The key policy repo rate has been kept at 6.5% by the central bank. The RBI has held the repo rate steady for the eleventh time in a row. Since February 2023, the RBI has kept the repo rate at 6.5%.
In his monetary policy speech, Governor Shaktikanta Das stated that the Reserve Bank has chosen to reduce banks' cash reserve ratios by 50 basis points (bps) to 4%. The percentage of deposits that banks must hold aside as cash is known as the cash reserve ratio, or CRR.
"The CRR rate cut has occurred, as the market had expected. This unexpected and positive action will increase the amount of liquidity in the system. The RBI seeks to strike a balance between growth and inflation. However, we must wait for additional RBI commentary on the rate decrease," stated WealthMills Securities' Director of Equity Strategy Kranthi Bathini.
The cut will take effect on December 14 and December 28 in two 25 basis point tranches. Das stated that the banking system would get Rs 1.16 lakh crore as a result of the CRR cut.
For the first time since April 2020, the RBI has lowered the CRR by 50 basis points, which indicates the direction of monetary policy. The odds are in favor of a possible rate drop in February, even though key policy rates remain steady for the eleventh consecutive month. Since inflation is still unstable, we still need to examine worldwide trends. "The RBI has done a great job of striking a balance between economic growth and inflation controls," stated Adhil Shetty, CEO of Bankbazaar.com.
The Governor stated that the RBI's mandate was price stability, but that growth was also crucial. According to Das, the MPC also took note of the recent slowing in GDP growth.
The MPC also lowers its FY25 GDP predictions to 6.6% from 7.2% before, while estimating CPI inflation for 2024-25 at 4.8%.
In an effort to boost capital inflows into the nation, the Reserve Bank also increased the interest rate ceiling for banks accepting foreign currency non-resident (FCNR-B) deposits. Non-resident Indians are permitted to hold foreign currency term deposits in India under FCNR-B.
