RBI Cuts Repo Rates By 25 BPS, Sensex Surges

04 March, Mumbai

The Reserve Bank of India (RBI) cut its policy repo rate under the Liquidity Adjustment Facility by 25 basis points to 7.5% Wednesday, delivering its second cut this year on the back of easing inflation and the government’s commitment to fiscal discipline.

The RBI had slashed interest rates by 25 bps on Jan 15. Both rate cuts this year were outside of the central bank’s scheduled policy review meetings.

The cash reserve ratio (CRR) was however kept unchanged at 4%.of net demand and time liabilities.
The central bank continued to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions.
The RBI also continued with daily variable rate repos and reverse repos to smooth liquidity.
Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect.
As the RBI cut the repo rate the S&P BSE Sensex surged over 343.59 points or 1.16 per cent to 29,937.27 in the pre-open session on Wednesday
Similarly, the CNX Nifty jumped 112.9 points or 1.25 per cent to 9,109.15.
Major Sensex gainers were Axis Bank 3.03%, ICICI Bank 2.76%, SBIN 2.56%, HDFC 2.23% and HDFC Bank 1.93%, while only two losers among 30-share Sensex constituents were Dr Reddy’s 0.48 per cent and Wipro 0.43 per cent.
Barring healthcare, all other BSE sectoral indices were trading significantly in the green. Among them, realty index was the star-performer and was up 2.16 per cent, followed by banking 1.84 per cent, capital goods 1.04 per cent and PSU 0.73 per cent, while healthcare index was down 0.15 per cent.