Sensex falls over 100 points amid RBI announcing rate cut by 25 bps

After the Reserve Bank of India (RBI) on Wednesday announced reduction in the reverse repo rate by 25 basis points (bps), volatility gripped the benchmark indices as the Sensex dipped down 106.82 points at 32468.35, while the Nifty was down 38.5 points at 10076.5.

The six member monetary policy committee (MPC), headed RBI governor Urjit Patel announced the policy in view of the moderation in price trends that have persisted long enough to warrant lower loan costs.

The RBI Governor Urjit Patel in his speech said that inflation rates have slowed to record lows and food prices have been falling. Consumer price index (CPI)-commonly referred to as retail inflation that the RBI tracks-moderated sharply to 1.54 percent in June, the lowest since the index was re-based to 2012 in a new data series.

As per the bank's statement, since June 2017 meeting of the MPC, impulses of growth have spread across the global economy albeit still lacking the strength of a self-sustaining recovery.

"Among the advanced economies (AEs), the US has expanded at a faster pace in Q2 after a weak Q1, supported by steadily improving labour market conditions, increasing consumer spending, upbeat consumer confidence helped by softer than expected inflation, and improving industrial production. Policy and political risks, however, continue to cloud the outlook," added the statement by RBI.