Shares of rate sensitive sectors such as banking, real estate and infrastructure have rallied on expectations that the Reserve Bank of India (RBI), at its meeting today to review monetary policy, may announce reduction in key policy rates.
The Bombay Stock Exchange (BSE), real estate sector index have surged more than 4%, while capital goods, bankex and auto index are trading higher by 2-3% each as compared to 1.1% rise in benchmark Sensex at 0933 hours.
HDIL and Indiabulls Real Estate from realty has rallied over 8% each, State Bank of India (SBI) and ICICI Bank from banking, Larsen and Toubro and BHEL from capital goods have surged more than 4% each, while Tata Motors and Maruti Suzuki are up 3% each on the BSE.
The government's reforms move provides room for RBI to ease monetary policy to give thrust on growth, according to market reports.
Meanwhile, SBI’s Pratip Chaudhuri expects the RBI to leave the key policy rates unchanged, but sees a 1% reduction in the cash reserve requirements (CRR), which can help banks trim base rates.
CRR is the proportion of deposits that banks need to keep with RBI as cash. Banks do not earn any interest on it. At present, the CRR is 4.75 per cent.
