DELHI: India’s equity market remained steady on Friday morning, with benchmark indices BSE Sensex and NSE Nifty50 trading flat after the Reserve Bank of India’s Monetary Policy Committee (RBI MPC) decided to keep the repo rate unchanged at 6.5% for the 11th consecutive time. The repo rate has remained at this level since February 2023.
As of 11:00 AM, both indices recorded modest gains of around 0.05%.
The RBI also announced a reduction in the Cash Reserve Ratio (CRR) from 4.5% to 4%, a move expected to inject an additional Rs 1.16 lakh crore into the banking system. Experts believe this development is positive for the equity market, particularly for banking stocks.
“The decision to cut the CRR by 50bp facilitating injection of Rs 1.16 trillion of liquidity into the system will ease the liquidity constraints and more importantly reduce the banks’ cost of funds. From the market perspective, this is an excellent policy response. Banking stocks will remain resilient,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Divam Sharma, Founder and Fund Manager at Green Portfolio said that reduction in CRR is a positive and should impact the banks positively and ensure liquidity in the system.
“Barring some of the uncertainties that could evolve in macros, we believe that the financial system is stable, RBI decisions are proactive and responsive and our economy is in a comfortable zone. The markets should continue to benefit over the near term. FPI inflows have been challenging and steps to support growth in FPI flows, especially from the NRI's will have a positive impact on the markets. We believe that as the transition happens in the US, the FPIs should increase flows to Indian markets,” said Sharma.