Mumbai: Benchmark equity indices gave up gains to end almost flat on Thursday as investors booked profits at higher levels, after the Reserve Bank surprisingly reduced the repo rate by 0.25 per cent. After rising nearly 200 points, the 30-share BSE Sensex ended 4.14 points, or 0.01 per cent, lower at 36,971.09; while the broader Nifty settled 6.95 points, or 0.06 per cent, higher at 11,069.40. India VIX, the fear gauge for domestic equities, rose 1.40 per cent.
Rate-sensitive stocks swung between gains and losses after the rate-cut announcement, with BSE realty index slipping 0.02 per cent, Bankex gaining 0.04 per cent and auto index soaring 1.77 per cent. The Reserve Bank of India cut the repo rate by 0.25 per cent to 6.25 per cent on the expectation that inflation will stay 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.
From the stock market point of view, the policy decision is already discounted in indices. Traders are looking to book some profit from here, which can push indices to lower levels, said Debabrata Bhattacharjee, Head of Research, CapitalAim.
“In a medium-term, 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.