Market pares some gains after RBI decision; rate-sensitive stocks rise

Benchmark equity indices pared some gains in afternoon trade Thursday as investors booked profits at higher levels, after the Reserve Bank of India reduced the repo rate by 0.25 per cent.

The 30-share index was trading 33.94 points, or 0.09 per cent, higher at 37,009.17.

Similarly, the 50-share NSE Nifty rose 8.90 points, or 0.08 per cent to 11,071.35.

Rate-sensitive banking, auto and realty indices jumped up to 1 per cent after the rate-cut announcement.

The Reserve Bank of India cut the repo rate by 0.25 per cent to 6.25 per cent on expectation of inflation staying within its target range, a move that may make home and other loans cheaper.

The RBI, under its new Governor Shaktikanta Das, changed the monetary policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening of rates if inflation remain benign.

This rate cut means a lot for the market as it is announced post budget, said Mustafa Nadeem, CEO, Epic Research.

"The market is likely to take it on a positive note; but with the recent run-up to 11,100, we believe it may be ripe for traders to take some profit," he said.

"In a medium-term perspective market has always reacted positively to a rate cut. Since we are in an environment where RBI is now neutral with a focus to keep growth in an economy and tab on inflation, we may attract long term money that can move the market.

"This is a positive event for the market though on a cautious note - we have an election in the next three months. So that needs to be taken into account," he added.

According to Harsh Gupta, CIO of Ashika Group: Equities, especially real estate, financials and infrastructure stocks should do well. "Even the rupee is likely to strengthen given that foreign institutional investors (FIIs) are more exposed to equities than Indian debt."