Interest rate sensitive stocks,such as banking,auto and realty,gained up to 2 per cent in late morning trade after RBI slashed short term lending rate by 0.50 per cent,a development that will lead to cuts in the cost of home,auto and corporate loans.
The stock market,which was anticipating a 25 basis points cut in interest rates,cheered the RBI moved and gained momentum as the BSE benchmark index Sensex surged over 200 points soon after the announcement.
Shares of SBI rose 1.44 per cent,ICICI Bank – 1.13 pct,HDFC Bank – 0.26 pct,Canara Bank – 1.32 pct and Yes Bank 0.73 pt. Following the surge in these stocks,the BSE banking index gained 0.79 per cent to 12,123.66.
“RBI rate cut was ahead of market expectations as we hoped for a 25 bps cut in the rates. This is a very positive trigger for the markets. Going forward we may see more buying interest rate sensitive stocks,” Geojit BNP Paribas Research Head Alex Matthews said.
In the realty space,DLF was up 1.63 per cent, HDIL — 3.51 pct and Unitech — 2 per cent. The gains pushed the BSE realty index 1.67 per cent to 1,811.18.
Among auto stocks,Hero MotoCorp was trading 1.34 per cent higher,Apollo Tyres rose 1.85 per cent and Bajaj Auto climbed 0.77 per cent. The BSE auto index was quoting 0.49 per cent up at 10,338.90.
After a gap of three years,Reserve Bank Governor D Subbarao today slashed short term lending rate by 0.50 per cent to 8 per cent,a move that will reduce the cost of home,auto and corporate loans.
The reduction in the repo rate at which RBI lends to banks,has been prompted by deceleration in growth and softening of inflation.
After two consecutive cuts since January,the Governor,however,retained the cash reserve ratio at 4.75 per cent.