RBI, govt packages to buoy markets

Stock markets are expected to open strong on Monday on the back of the Reserve Bank of India’s (RBI) latest policy move and can ride further on a stimulus package from the government for the economy. However, sustainability of positive sentiments would also depend on global trends, analysts said today.

The Reserve Bank of India’s (RBI) move to slash the key short-term rates by 100 basis points is likely to provide a positive push to the volatile stock market, say analysts. However, they cautioned that the impact of fresh monetary measures would be short-lived as these are in line with expectations.

“RBI’s step of reducing both repo and reverse repo rates by 100 basis points is in line with the market expectations. It was expected consequent upon sharp reduction in inflation over the last few weeks and the desperate need for kick-starting the process of providing stimulus for growth,” Reliance Money CEO Sudip Bandhyopadhyay said.

RBI today announced one percentage point cut in the short-term rates at which it lends and borrows from banks, along with a slew of other measures.

The short-term lending rate (repo) would fall to 6.5 per cent and borrowing (reverse repo) rate to 5 per cent with effect from December 8. The primary liquidity made available to the system through these measures is worth over Rs 3,00,000 crore.