Markets rebound post RBI decision to cut key rates

Rate sensitives remain in red even as IT shares gain 1%; Bank and auto shares lead decline

Markets have recoeverd from the day's low at 11:30am following the RBI policy review in which key rates were cut by 25 bps. The Sensex touched a low of 19553 in morning trades. However, it has smartly run up post the RBI announcement and is now down 28 points at 19,708. Nifty is down 12 points at 5,988.

The Reserve Bank of India cut its policy interest rate by 25 basis points on Friday for the third time since January, as expected, as growth slows and inflation ebbs, but said there is little room to ease monetary policy further.

The RBI trimmed the repo rate to 7.25%, its lowest since May 2011, and kept the cash reserve ratio (CRR) for banks unchanged at 4%, also in line with expectations.

Rate sensitive sectors slipped in noon deals. BSE realty index has slipped 1.1% at 1908. Bankex is down 0.8% at 14,412. According to RBI policy statement, the current account deficit swelled to a record 6.7% of GDP in the December quarter. While it is expected to ease on lower global commodity prices and a rise in exports, it is on track to remain well above the 2.5% level that is seen as sustainable.

The BSE auto index is down 0.7% at 10,920. On the other hand, the capital goods and IT indices have bucked trends and moved up around 1% each. The rupee today lost 17 paise to 53.98 against the dollar in early trade on the Interbank Foreign Exchange market due to appreciation of the US currency against other currencies overseas. The dollar's movement affects the IT index as US is the biggest market for the IT service industry.

Market heavyweight - Reliance is up 1.4% at Rs 814 and is the top gainer right now. NTPC has added 1.3%, followed by Bharti Airtel, Jindal Steel and NTPC. Meanwhile, SBI has slumped 2.2% at Rs 2,249. ICICI bank, HDFC and HDFC Bank from the financial space are down 1-1.5% each. Auto shares are in the red with Tata Motors and Bajaj Auto leading the decline.

BSE market breadth is weak. Out of 2010 shares traded, 1098 shares have declined while 800 shares advanced in trades.