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Market turns weak as RBI keeps rates unchanged

Market turns weak as RBI keeps rates unchanged
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First Published: Tue, Jan 29 2008. 04 39 PM IST
Updated: Tue, Jan 29 2008. 04 39 PM IST
Mumbai: The Reserve Bank’s decision to keep key rates steady disappointed the stock market, with benchmark Sensex on the Bombay Stock Exchange ending 61 points lower after an initial strong surge on account of Strong global cues and on hopes of central bank effecting a repo rate cut.
The Reserve Bank in its quarterly monetary policy review meeting on Tuesday kept all key rates -- repo rate, reverse repo rate, bank rate and cash reserve ratio -- unchanged in a bid to maintain financial and price stability, contrary to expectations of a 0.25% cut in repo rate.
After the apex bank announced its quarterly monetary policy review during mid-session, the 30-share BSE index witnessed high volatility. The index in the morning trade had bounced by 338.28 points.
The BSE barometer settled the day at 18,091.94, down 60.84 points, or 0.34%, from last close of 18,152.78 points.
The broad-based Nifty of the National Stock Exchange, however, ended marginally up by 6.70 points, or 0.13%, to close at 5,280.80 from its last close of 5,274.10.
The central bank’s decision had a direct impact on bank and realty stocks as their operations are related to lending rates. Lower rates help banks to increase their borrowing business while it boosts bottom lines of real estate firms.
Analysts said bulls made a strong attempt to tighten their grip during morning trading after a positive turnaround in the second half of trade on Monday.
Global markets surged on expectations of a fresh rate cut by another 50 basis points after a dismal US housing report renewed worries about the US recession.
The US Federal Reserve is meeting on 30 January to discuss any further rate cut.
Finance Minister P Chidambaram’s statement on further measures to contain capital inflows also had a sentimental impact on the market, market players said.
Asian indices ended up by about 0.29% to 2.99% while European markets showed strong trend on Tuesday morning.
The trading volume was low but relatively up at Rs4,793 crore compared to Rs3,923.76 crore on Monday. RNRL remained the top traded share with the highest turnover of Rs292.92 crore followed by Essar Oil (Rs288.36 crore), REL (Rs182.23 crore), RPL (Rs156.50 crore) and RIL (Rs140.74 crore).
The broad-based BSE-100 index declined further by 25.37 points to 9,719.92 from previous close of 9,745.29.
The BSE-200 index and the Dollex-200 were quoted slightly down at 2,298.84 and 971.60 at close compared to last close of 2,304.80 and 973.18 respectively.
The markets are trading flat. The RBI decision to keep key interest rates unchanged did not go down well with equity market. All the rate sensitive sectors like auto, bank and realty have been hit as the central bank has kept the rates unchanged.
At 12.51 hrs IST, the Sensex was up 8.47 points at 18161.25, and the Nifty down 14.50 points at 5259.60.
The Bombay Stock Exchange benchmark Sensex rose 314 points in early trade on Tuesday following revival of buying at existing lower levels on expectations that the RBI may cut interest rates in its policy review meeting on Tuesday.
The 30-share index, Sensex, which lost 209 points on Monday, moved up by 314.29 points to 18,467.07 in the first five minutes of trade.
The National Stock Exchange’s index, Nifty, increased by 102.70 points to 5,376.80 as most of the heavy-weight stocks gained fresh ground.
Buying activity picked up on expectations that the apex bank may slash interest rates in its policy review meeting later today, following the footsteps of US counterpart, marketmen said.
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First Published: Tue, Jan 29 2008. 04 39 PM IST
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