Rate-sensitive stocks feel the chill after RBI rate pause

Olive Hawkins
December 7, 2017

"They don't seem to favour a rate cut going forward".

Reserve Bank of India (RBI)'s move on monetary policy steered the trajectory of Indian market on Wednesday, with equities suffering for the second straight session.

RBI Governor Patel said the central bank was working with the financial services department to determine for each bank the amount of recapitalisation bonds to be placed on its balance sheet and also the amount of external fund-raising.

Weaker copper also checked risk sentiment.

Keeping one eye on inflation and rising global headwinds, the Reserve Bank of India (RBI) on expected lines chose to keep rates on hold for now in its fifth Bi-monthly monetary policy statement released on Wednesday.

"Recapitalisation bonds will be front-loaded for banks that have managed their balance sheet strength more prudently and can use the injected capital to lend besides providing for legacy asset losses", Patel said after the RBI kept its key policy rate unchanged.

The broader NSE Nifty too slipped by 9.50 points, or 0.09%, to end at 10,118.25, after moving between 10,069.10 and 10,147.95. Food prices are inching up due to unseasonal rains that hit the rabi crop and the fact that traders are passing on high prices to retailers.

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Interest rate-sensitive stocks took a beating, dragging the BSE banking index down by 1.23%.

Punjab National Bank is now trading at Rs171.35, down by Rs4.65 or 2.64% from its previous closing of Rs176 on the BSE.

Sun Pharma emerged as the worst performer among Sensex constituents by falling 2.31%, while Bajaj Auto declined 1.65%.

In a stimulus package aimed to boost flagging economic growth, create jobs and increase credit flow, the cabinet, in October, approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks and massive road infrastructure investment of almost Rs 7 lakh crore over five years.

Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 1,470.56 crore, while domestic institutional investors (DIIs) bought to the tune of Rs 1,074.39 crore yesterday, as per data.

Asian markets retreated, with Japan's Nikkei falling 0.37%, Hong Kong's Hang Seng declining 1.01% and Shanghai Composite Index finishing 0.18% lower. London's FTSE too fell 0.16%.

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