RBI cuts repo rate by 25bps, here is how Sensex, Nifty reacted; Asian Paints, Coal India, HUL top gainers

The Reserve Bank of India (RBI), as expected, slashed policy repo rate by another 25 basis points, taking it down to 5.75%. Following the announcement, there was heavy selling pressure witnessed in Sensex and Nifty 50 and they both dropped by 160 points and 70 points respectively within few minutes of the announcement. At around 1203 hours, Sensex was trading at 39,979.63 down by 115.28 points or 0.29%. On other hand, the 51-scrip index was trading at 11,971.75 below 49.90 points or 0.42%. 

Among major stocks that took a beating on Sensex post RBI policy were - IndusInd Bank at Rs 1,585.45 per piece down by 3.10%, followed by Vedanta at Rs 163.05 per piece below 1.72%, Yes Bank at Rs 150.25 per piece down 1.64%, L&T at Rs 1,549 per piece down 1.34%, Tata Steel at Rs 490.60 per piece below 1.32%. 

Other stocks that tumbled were M&M, Reliance Industries, Sun Pharma, TCS, ICICI Bank, Bharti Airtel, Bajaj Finance, SBI, ITC, Tata Motors, Kotak Bank, HDFC, Hero Motocorp and HDFC Bank in the range of 0.04% to over 1%. 

Meanwhile, gainers on Sensex were stocks like Asian Paints at Rs 1,447.40 per piece above 1.84%, followed by Coal India at Rs 267.30 per piece up 1.54%, HUL at Rs 1,843 per piece up 1.48%, Power Grid at Rs 195.60 per piece up 1.29% and HCL Tech at Rs 1,090.65 per piece up 0.75%. Other stocks were Infosys, NTPC, ONGC, Maruti Suzuki and Bajaj Auto who also saw marginal gains. 

Amit Gupta, Co-Founder, and CEO, TradingBells states, “RBI has announced a rate cut of 25 basis points fueled by a stable government, sharp decline in crude oil prices and a slowdown in the economy. RBI changed its stance to accommodative and a possibility of further rate cuts this year remains open (we can expect a further rate cut of 50 to 75 basis points in 2019). Real estate, NBFC,  Banking, and Auto sectors would be the key beneficiaries of this rate cut where a temporary uptick can be seen in many stocks but quality stocks will continue to outperform”.

Meanwhile, Romesh Tiwari, Head of Research, CapitalAim, comments, "25 basis point cut is inline with our minimum expectation and was already discounted in the market. The downward revision of GDP growth reflects concern over slowdown and supports shifting of RBI stance to accommodating policy. We expect banking shares to remain strong in the midterm while NBFCs may further correct before consolidating. Largely market will not be driven by this news. Current valuations do not justify Nifty and Sensex and are due for a correction soon. Now all the eyes will be on the Budget session which may bring some big measures for revitalizing the economy. Short term target for Nifty is 11,880 and breaking below that may take the Nifty 11,660 levels in the medium term."

Now repo rate under  the liquidity adjustment facility (LAF) by 25 basis points to 5.75 per cent from 6.0 per cent with immediate effect. In last 3 monetary policies, overall 75 basis point cut has been made in repo rate. Consequently, the reverse repo rate under the LAF stands adjusted to 5.50 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.0 per cent. 

However, the  MPC also decided to change the stance of monetary policy from neutral to accommodative. 

Against this backdrop, all members of the MPC (Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Shri Shaktikanta Das) unanimously decided to reduce the policy repo rate by 25 basis and change the stance of monetary policy from neutral to accommodative.