Sensex makes gains despite status quo in policy rates

A benchmark index of Indian equities markets was trading up 92 points or 0.35 percent, even as the Reserve Bank decided to keep key interest rates unchanged in its fourth bi-monthly policy review.

The benchmark index which was trading flat around pre-afternoon trade session, made gains despite the central bank's decision to keep the repo rate, or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, unchanged at 8 percent.

The status quo in key policy rates mean the equated monthly installments (EMIs) on home, auto and other loans would remain unchanged as these rates determine lending and borrowing rates of the commercial banks.

A cut in these rates would have also reduced the cost of accessing funds for lending institutions. It would have also eased money supply in the financial system by making it more attractive for commercial banks not to park their funds with the RBI in the form of government securities, and instead lend it for commercial purposes.

Sector-wise information technology (IT), technology, entertainment and media (teck) and power declined.

However, healthy buying was observed in consumer durable, automobile, capital goods, healthcare and bank stocks.

The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 26,610.71 points, was trading at 26,689.50 points (11.50 a.m.), up 92.39 points or 0.35 percent from the previous day's close at 26,597.11 points.

The Sensex touched a high of 26,737.36 points and a low of 26,547.44 points in the trade so far.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) too was trading flat. It was trading at 17.10 points or 0.21 percent up at 7,976 points.

The apex bank also maintained the reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, has been adjusted to 7 percent.

The Cash Reserve Ratio (CRR) was unchanged at 4 percent. The marginal standing facility rate and the Bank Rate was left unchanged at 9 percent.

The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must keep with the RBI, has been maintained to 22.0 percent of their net demand and time liabilities (NDTL).

The central bank's action is on the expected lines as most analysts predicted a status quo, considering the macro-economic situation and current data.