Indian shares ended lower on Thursday, after the central bank cut its benchmark interest rate by 25 basis points, while also changing its policy stance to “accommodative,” in a widely expected move, according to Reuters.
The broader NSE index fell 1.48 per cent to 11,843.75, while the benchmark BSE index ended 1.38 per cent lower at 39,529.72, as the Reserve Bank of India (RBI) lowered the repo rate to 5.75 per cent and cut the reverse repo rate to 5.5 per cent.
The 10-year bond yield fell to 6.911 per cent following the RBI’s announcement, while the rupee, which initially strengthened after the decision, weakened to 69.3125 against the dollar at 1014 GMT .
“When the GDP numbers were out, the market did not react negatively and instead started looking toward the rate cut, so the rally has already happened,” said Vidya Bala, Head of Mutual Fund Research at FundsIndia.com.
This is the central bank’s first rate decision since the landslide victory of Prime Minister Narendra Modi’s government last month, which is expected to stimulate India’s economy after it grew at its slowest pace in 17 quarters in the March quarter.
Shares of Dewan Housing Finance Ltd, one of India’s biggest shadow banks or Non-banking Finance Companies (NBFC) fell as much as 18.3 per cent to 91.3 rupees, their lowest in over five years, after a slew of credit rating downgrades.
“The market was probably disappointed that the RBI has not given any clear view or stance as far as NBFCs are concerned,” Bala added.
Indian shadow banks have been under distress due to a strain in funds that began last year.
The Nifty public sector bank index ended about 5.0 per cent lower, while the private bank index index fell 2.29 per cent at the closing bell.
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