Mumbai, January 28
On the eve of RBI’s credit policy review and taking cues from the Asian markets, the Sensex was trading most of the day deeply in the red before recovering slightly to close 1.1 per cent or 208 points down at 18,152 points.
The Sensex touched an intra-day low of 17,443 levels. In the broader markets, the Nifty closed 2.03 per cent lower or 109 points at 5,274. Today’s major losers were in the real estate, metal, oil & gas and information technology sectors. DLF, Wipro, Bharti and Infosys fell more than 4.9 per cent each.
Among sectoral indices, the BSE real estate index was the biggest loser, falling 4.5 per cent or 505 points. HDIL was the biggest loser falling 7.3 per cent or Rs 79 to close at Rs 1,002. Elsewhere, Asian markets closed in the red amidst worries of a recession in the US. Hong Kong's Hang Seng fell 4.3 per cent while Japan's Nikkei and South Korea's Kospi fell more than 3.9 each.
PTI adds: A massive 75 basis points rate cut by the US Federal Reserve is likely to cast a shadow on the quarterly review of credit policy in India, to be announced by the Reserve Bank tomorrow. On one hand, the RBI will have to initiate measures to contain inflow of foreign capital — which is expected to increase as an aftereffect of the Fed rate cut, on the other it will need to ensure that such inflows do not fuel inflationary pressures.
Another important task before the RBI would be to maintain growth momentum by arresting a declining demand for consumer durables, possibly by reducing the benchmark interest rates (repo rate) by 25 basis points.
Without indicating what RBI may do, Finance Minister P Chidambaram had said in Davos last week that the priority of the government would be to keep inflation rate
low rather than focus on high growth. “Between inflation and growth, what hurts the poor most is the inflation. That is why we must keep inflation low. At the moment, we are comfortable with inflation below 4 per cent and growth above 8 per cent... I will be in a great trouble if inflation rises to 6 per cent,” the Finance Minister added.
Echoing similar sentiments, RBI Governor Y V Reddy had recently indicated that central bank would remain sensitive to uncertainties in global markets and high prices of crude oil and food items, which may fuel inflationary expectations.
According to SBI chairman and managing director O P Bhatt, the Reserve Bank may not automatically cut rates in its monetary policy review this month end in the wake of 75 basis points reduction in key rates by the US central bank.
In the given scenario, it is expected
that RBI, without tinkering with CRR, would cut repo rate by 25 basis points, PNB executive director K Raghuraman opined.
