Sensex jumps up 577 points, reacting to RBI policy, rates, forecast

The NSE Nifty, after shuttling between 10,331.80 and 10,227.45, finally settled 196.75 points, or 1.94 points higher at 10,325.15

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New Delhi: Benchmark Sensex surged 577 points to end at 33,597 today after the RBI kept the policy rate unchanged and lowered the inflation forecast.

The central bank kept the interest rate unchanged at 6% for the fourth consecutive time since August last year but lowered retail inflation projection for the first half of current fiscal to 4.7-5.1% and 4.4% for the second half.

The Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel expects the growth rate to accelerate to 7.4% in 2018-19, up from 6.6% last fiscal, ended March 31, mainly on account of the revival of investment activity.

With regard to prices, the MPC lowered retail inflation target for the first half of current fiscal to 4.7-5.1% on sharp moderation in food price rise.

The status quo policy of RBI will be neutral to the EMIs for housing and vehicle loan borrowers, but banks are free to tinker with both deposit and lending rate depending on their asset liability position.

The decision of MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of ±2% while supporting growth.

The MPC maintained status quo for the fourth consecutive time since August last year.

The repo rate, at which the central bank lends short-term money to banks, will continue to stay at 6%. The reverse repo rate, at which it borrows from banks and absorbs excess liquidity, will remain at 5.75%

The Reserve Bank also said India’s economic growth rate is expected to strengthen to 7.4% in the current fiscal, from 6.6% in 2017-18, on account of revival in investment activity.

The BSE Sensex took off on a positive note at 33,289.96 and advanced to the day’s high of 33,637.46 before ending at 33,596.80, up 577.73 points, or 1.75%.

This is its biggest single-day gain since 12 March when it had rallied 610.80 points. The gauge had lost 351.56 points in the previous session.

The NSE Nifty, after shuttling between 10,331.80 and 10,227.45, finally settled 196.75 points, or 1.94 points higher at 10,325.15.

The markets also cheered the ‘normal” southwest monsoon forecast by private weather forecasting agency Skymet.

Positive global cues, as trade war worries between the US and China faded, bolstered trading sentiment.

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