Global mkts stifling Nifty; transmission key now: Experts

Apart from cutting the repo rates, Rajan also announced the relaxation of foreign investment cap in government bonds to 5 percent by March 2018.

In aggregate terms, this is expected to open up room for additional investment of Rs 1,20,000 crore in the limit for central government securities by March 2018 over and above the existing limit of Rs 1,53,500 crore for all government securities (G-sec).

The market, which surged into the green post the announcement managed to recoup past sessions' losses. While the Nifty failed to touch its psychological 8000 mark,  Nirmal Jain of IIFL says the enthusiasm is lower on the back of a weak global market.

"Had this quantum of rate cut not announced, the market would've seen a steep correction. But hereon, the market direction is dependent on government's action," Jain explains.

Sonal Varma, ED & India Economist, Nomura Fin Advisory & Securities, agrees with Jain's view. She believes the Governor has deliver more than expected but investment is needed now, more than ever before, in order to prevent India becoming a consumption-driven economy yet again.

A cut in repo rate brings in good news for house owners, who pay their loans through easy monthly instalments (EMIs) as banks, usually, transmit the eased repo rate by cutting their home loan rates.

Keki Mistry, head of home loan lender, HDFC, says that while he cannot comment on how much loan rates can come down by, the RBI's move definitely makes a case for lower interest rates.

In order to revive the languishing realty sector, the Governor today proposed lower to lower the minimum risk weight on housing loans from the current 50 percent.

Gagan Banga of Indiabulls Housing says this is a very big positive for the home loan industry and allows more capital to be deployed and to be worked around more efficiently. He expects home loan rates to come down by 25-50 basis points very soon.

While the positives have been hailed immensely, the fulcrum of the policy as well as investors' discussion post the meet was on the transmission of lower interest rates- something the Governor has highlight, and reproached banks for, in every policy meet.

While Kannan says any decision to lower base rates will be taken only post the Assets and Liabilities Committee (ALCO) meeting, Narayan says the transmission is a very nuanced argument.

"PSU banks have not been able to pass it on because their net interest margins (NIMs) have not seen any significant growth," he adds.(Posted by Ritika Dange)