Indian Markets Fall After RBI Disappoints Investors

 
on June 18 2012 7:31 AM

Indian markets fell Monday after the Reserve Bank of India (RBI) announced that the key rates would remain unchanged.

The BSE Sensex was down 237 points or 1.44 percent and closed at 16712 while NSE Nifty was 74 points or 1.46 percent down and closed at 5064. CNX Midcap Index dropped 1.3 percent and BSE Small-Cap Index was down 0.6 percent.

The RBI disappointed the industry as it left the repo rate and cash reserve ratio unchanged at 8.0 percent and 4.75 percent respectively. The reverse repo rate at which banks lend money to the RBI also remains unchanged at 7 percent.

The RBI's decision to maintain status quo on the interest rates hit hard at the rate cut-sensitive sectors like banking, automobiles and realty. The largest state lender, the State Bank Of India (SBI), fell 4.45 percent, PNB 4.49 percent, IDBI 4.84 percent and ICICI Bank 3.45 percent. The BSE banking index was 3.21 percent down, realty index fell 3.05 percent and capital index dropped 1.8 percent.  

Markets expected the RBI to cut rates to boost growth which it did not do. It will take some more time for the monetary easing theme to play out in the near term. We will have to wait for policy action from the government on reforms for growth to pick up, the Economic Times quoted Gajendra Nagpal, CEO of Unicon Investment Solutions, as saying.

The Sensex and NSE's Nifty opened Monday on a bullish note with hopes of monetary measures from the RBI and strong global cues from the favorable outcome of the Greek elections.

The Sensex was trading at 17,092, up 142 points from its previous close, and Nifty was at 5,183, up 44 points in the early morning session. Indian markets were also buoyed due to the strong Asian markets which were trading in the green.  The Sensex touched a high of 17,109.95 and a low of 16,636.09 Monday. The CNX Midcap index dropped by 1.4 percent and the BSE Smallcap index was down 0.8 percent.

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