RBI Cuts Repo By 25 Bps, CRR Unchanged At 4%; Sensex Falls 160 Pts On RBI`s "Hawkish" Policy Stance

Friday, May 03, 2013

RBI CUTS REPO BY 25 BPS; CRR UNCHANGED AT 4%  
RBI trimmed repo rate to 7.25%, but warned everyone that RBI has little room for further policy easing & putting onus on govt to revive economy. RBI Governor, D Subbarao warned that risk of rising prices persists despite a recent sharp decline in WPI inflation and its intention is to lower WPI inflation to 5% by March 2014 "using all instruments at its command." Subbarao also said a high CAD poses the biggest risk "by far" to the Indian economy. RBI expects the economy to grow at 5.7% in FY14 & projected headline WPI inflation at around 5.5% in FY14. read more  
LEAD STORIES
SENSEX FALLS 160 PTS ON RBI'S "HAWKISH" POLICY STANCE 
Sensex yo-yoed 160 pts as investors were in selling mode. Nifty fell 55.35 pts to close at 5,944 while Sensex ended at 19,575.64. read more
BHARTI TO SELL 5% STAKE TO QATAR FOUNDATION FOR $1.26 BN 
Bharti Airtel said they are planning to strengthen its capital structure & fund future growth plans with the stake sale money. read more
MOODY'S SEES INDIA'S SOVEREIGN OUTLOOK STABLE 
India's sovereign outlook is stable & does not warrant any action on India's credit rating in the next 12-18 months, according to Moody's. read more
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EVENTS TO WATCH
4 May
IPL 6, Match 45, Sunrisers Hyderabad Vs Delhi Daredevils, Hyderabad
5 May
IPL 6, Match 46, Mumbai Indians vs Chennai Super Kings, Mumbai
IPL 6, Match 47, Rajasthan Royals vs Pune Warriors, Jaipur
6 May
IPL6, Match 47, Kings XI Vs Royal challengers, Mohali
7 May
JPC Meet
EGoM On Gas Meet
IGL Vs PNGRB Case

EXPERT VIEWS
"Monetary policy action, by itself, cannot revive growth. It needs to be supplemented by efforts towards easing the supply bottlenecks, improving governance and stepping up public investment.Overall, the balance of risks stemming from the Reserve Bank's assessment of the growth-inflation dynamics yields little space for further policy easing."

D. Subbarao
RBI Governor
"How much scope is there? I would say 1 bps is much too high, there is no scope to cut lending rates. Effective demand in whatever you relatively see is not very much in the corporate side but the consumer demand particularly home and car continues to be strong and till such time we have enough deployment there I do not think there would be great compulsion on us to cut lending rates."

Pratip Chaudhuri
Chairman, SBI
"The decision of RBI to cut the policy rates by 25 basis points sends a strong signal that the RBI is refocusing its priority in favour of growth. However, the given economic conditions required a bolder intervention from the RBI. In such a scenario, aggressive monetary easing affected by a 50 bps cut in repo rate would have provided the necessary stimulus, along with a 50 bps reduction in CRR."

S Gopalakrishnan
CII President
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