The six-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel on Tuesday started two-day deliberations amid expectations of at least 25 basis points cut in the key repo rate as inflation has cooled to record low levels. Encouraged by the significant decline in prices, bankers expect the RBI to change its monetary stance.
Some expect that the central bank may go for an even more aggressive rate cut of 50 basis points as the retail inflation touched historic low of 1.54 per cent in June. The panel, in its previous bi-monthly review in June, had retained the repo rate at 6.25 per cent for the fourth straight time citing risk to inflation. With the markets expecting a rate cut, the Sensex settled at yet another new high of 32,575.17 by surging 60.23 points, or 0.19 per cent. The index had risen 205.06 points in the previous session. The NSE Nifty closed at 10,114.65 — a new peak — up 37.55 points, or 0.37 per cent.
Improving monthly sales numbers from automakers and a firming trend in global markets fuelled the rally. Auto stocks, led by Maruti Suzuki, were in the driver’s seat. The country’s largest carmaker went up 1.96 per cent to close at an all-time high after it posted a 21 per cent growth in total sales in July. Hero MotoCorp, M&M, Bajaj Auto and Tata Motors cruised.
What kept the gains in check was findings of a private survey which showed that manufacturing sector contracted in July following the GST launch as new orders and output dropped for the first time since the downturn in December last year post demonetisation.
With PTI inputs