Mumbai, Feb 7 (IANS) The Indian equity market bounced back into the green after falling more than 140 points during the late-afternoon trade session on Thursday.
The abrupt downfall in the market’s trajectory came after both the indices — S&P BSE Sensex and NSE Nifty50 — rose on the back of a surprise move by the Reserve Bank of India (RBI) to go for a rate cut.
At around 2 p.m., the BSE Sensex traded at 37,100.88 points, higher by 125.65 points or 0.34 per cent from the previous close of 36,975.23 points. It touched an intra-day high of 37,172.18 and a low of 36,915.13.
The NSE Nifty50 on the National Stock Exchange traded higher by 36.95 points or 0.33 per cent at 11,101.55, from the previous close of 11,062.45 points.
Interest sensitive auto and realty stocks gained around 1 per cent while the key banking stocks gained 0.50 per cent as a policy rate cut would lead to lower interest rates for loan seekers.
Analysts said that the RBI’s decision to cut the short term interest rate by 25 basis points and a change in stance to “neutral” from “calibrated tightening” will boost the markets.
“Though it primarily aims to keep inflation in a tab and boost growth, this is a much-needed breather for market and specifically interest rate sensitive sectors like housing, automobiles,” said Mustafa Nadeem, CEO, Epic Research.
In the final monetary policy review of the current fiscal, the RBI lowered its key lending rate for commercial banks to 6.25 per cent.
The decision was guided on the basis of an assessment of the evolving macroeconomic situation wherein headline inflation is projected to soften further and the economy’s growth impulses had moderated, the RBI said.
The central bank was more accommodating, changing its monetary policy stance from “calibrated tightening” to “neutral”.
According to Vijaykumar of Geojit Financial Services, the rate cut is appropriate amid slowing investment in the economy and a global growth slowdown. It is good news from the capital market perspective since it can reinforce the resilience seen in the key bench mark indices.
Sun Pharma led the gains on the BSE Sensex, gaining over 5 per cent while Bajaj Auto, Tata Motors, Tata Motors (DVR) and Hero MotoCorp gained in the range of 2 to 3 per cent.
The index losers were Reliance Industries, IndusInd Bank, HDFC, Asian Paints and Vedanta declining up to 1 per cent.