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The Reserve Bank of India (RBI) on Wednesday kept its key lending rate—the repo rate—unchanged at 6 percent, dashing hopes of lower borrowing costs for households and the companies ahead of the festival season.
The six member monetary policy committee (MPC), headed by RBI governor Urjit Patel, kept one eye firmly on the rising inflation that is perilously inching towards the RBI’s 4 percent threshold level.
The MPC reiterated that it is imperative to reinvigorate investment activity which, in turn, would revive the demand for bank credit by industry as existing capacities get utilised and the requirements of new capacity open up to be financed.
Recapitalising public sector banks adequately will ensure that credit flows to the productive sectors are not impeded and growth impulses not restrained.
In addition, the following measures could be undertaken to support growth and achieve a faster closure of the output gap: a concerted drive to close the severe infrastructure gap; restarting stalled investment projects, particularly in the public sector; enhancing ease of doing business, including by further simplification of the GST; and ensuring faster rollout of the affordable housing program with time-bound single-window clearances and rationalisation of excessively high stamp duties by states.
Interest rate sensitive stocks are almost trading flat. Among the big banking names, State Bank of India was up 0.64 percent at Rs 252.90 while ICICI Bank was in the red, down by 0.5 percent at Rs 277.05. HDFC Bank and Axis Bank were trading lower in the red down by 0.41 percent and 0.49 percent respectively.
In the auto space, Maruti Suzuki was down 0.26 percent while Tata Motors was quoting at Rs 418.50 per share, up 0.5 percent. Tractor manufacturer Mahindra & Mahindra was in the green, up by 1.28 percent. trading at 1281.45 per share. On the other hand, 2-wheeler majors Hero MotoCorp was up 0.08 percent while Bajaj Auto was quoting at Rs 3161 per share, down by 0.o7 percent.
Real estate stocks were up with DLF trading was down 0.6 percent while Oberoi Realty was up over 1.34 percent and Godrej Properties jumping over 3 percent and Prestige Estates gaining 0.44 percent ahead of the RBI policy.
All the housing finance stocks including the likes of LIC Housing Finance, HDFC and Dewan Housing Finance were trading in the green, up 0.18 percent, 0.34 percent and 0.13 percent respectively.
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