Markets@10: RBI holds repo rate at 6.5%; banks' interest rates not to change

The Reserve Bank of India (RBI) has maintained its repo rate at 6.5% in its latest monetary policy review, signalling no changes to interest rates. The central bank has adopted a neutral stance on liquidity, suggesting that banks are unlikely to face any tightening in funds availability. This has sparked hopes that a rate cut could be on the horizon.

RBI Governor Shaktikanta Das made the announcement, which initially boosted stock markets, but gains were pared back later in the day. The Nifty index rose from 25,110 to 25,135 during his speech, reaching a high of 25,190 before settling at 25,185. Similarly, the Sensex climbed from 81,800 to 82,192, then dipped to 82,030 before recovering above 82,150, reflecting overall satisfaction with the policy. The Bank Nifty also saw a 1% rise.

Growth projections for the current fiscal year remain unchanged at 7.2%. The GDP growth rate for the first quarter was 6.7%, and the RBI expects second-quarter growth, which ended in September, to reach 7%, slightly down from the earlier estimate of 7.2%. For the third and fourth quarters, the growth estimates have been revised upwards from 7.3% to 7.4% and from 7.2% to 7.4%, respectively. Looking ahead to the first quarter of the next fiscal year, growth is expected to reach 7.3%.

Inflation expectations

Inflation expectations remain at 4.5%, though the forecast for the second quarter holds at 4.1%. For the third quarter, the estimate has been revised slightly higher, from 4.7% to 4.8%, while the fourth-quarter forecast has been revised down from 4.3% to 4.2%.

The governor issued a stern warning to Non-Banking Financial Companies (NBFCs) regarding the rising levels of unsecured loans, cautioning them to be mindful of the risks involved.

In specific stock movements, Tata Technologies’ shares surged over 2% following news of a joint venture with BMW to establish an automotive software plant. Senko Gold saw a 4% rise after reporting a notable increase in revenues. Shares of oil marketing companies rose by up to 5% due to falling crude oil prices, which also benefited paint companies. RITES Ltd. gained 6.5% after signing a memorandum of understanding with Etihad Rail in the UAE.

On the currency front, the rupee started the day strong, with the US dollar opening 4 paise lower at ₹83.92. Gold prices dipped globally, falling to $2,618 per ounce, while in Kerala, gold for jewellery declined by ₹560 per sovereign, now priced at ₹56,240. Crude oil prices ticked up slightly, with Brent crude rising to $77.52 per barrel.