Domestic market benchmarks the Sensex and the Nifty continue trading in the green after the Reserve Bank of India (RBI) lifted the key repo rate on an expected line by 25 basis points (bps).
This was the sixth consecutive rate hike by the RBI to keep inflation in check. The repo rate now stands at 6.50 percent with immediate effect.
The RBI maintained the stance focused on "withdrawal of accommodation". The MPC decided by a majority of 4 out of 6 to increase the policy repo rate with immediate effect.
The central bank had raised the key rate by 35 basis points (bps) in the December policy after delivering three consecutive hikes of 50 bps.
RBI projected real GDP growth for 2023-24 at 6.4 percent with Q1 at 7.8 percent, Q2 at 6.2 percent, Q3 at 6 percent, and Q4 at 5.8 percent.
CPI inflation is projected at 5.3 percent for 2023-24, with Q1 at 5 percent, Q2 at 5.4 percent, Q3 at 5.4 percent and Q4 at 5.6 percent.
Market benchmarks opened higher on February 8, anticipating a 25 bps hike in policy rates. The RBI did not surprise which appears to have comforted the market.
Sensex traded 0.75 percent higher at 60,739.41 while the Nifty was 0.77 percent up at 17,858.65 around 10:15 am.
Among the rate-sensitive sectors, Nifty Realty was down 70 percent. Nifty Bank was up 0.3 percent while the Nifty Auto index was flat at that time.
"A 25 bp hike in repo rate by RBI was baked in bond yields. Two out of six MPC members voted for no rate hike. The market is a tad disappointed as there was no change in stance from the 'withdrawal of accommodation' to neutral. CPI Inflation is projected for FY24 at 5.3 percent. Market forecasters are expecting inflation to trend lower from RBI projections. The policy remains focussed on fighting inflation and should be welcomed by markets," said Sandeep Bagla CEO of TRUST Mutual Fund.
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