The Reserve Bank of India, unveiling its mid-quarter monetary policy review, has cut Cash Reserve Ratio by 25 basis points, infusing Rs 17,000 crore into the banking system. The central bank, however, has left repo and reverseve repo rates unchanged at 8% and 7%, respectively.
The RBI has stated that monetary policy from hereon will depend on inflation. It also said that mitigating growth risks require concerted policy action and that the government's policy announcements on friday pave better way for growth-inflation dynamics.
The Sensex, which rose to 18,715.03 in early trades, retreated to 18,516 post announcement of the monetary policy and is currently at 18,547, up 82.83 points or 0.45% from its previous close.
The Nifty index of the National Stock Exchange is up 24.75 points or 0.44% at 5602.40, around 50 points off the day's high of 5652.20.
Despite the central bank leaving repo rates unchanged, shares of rate sensitive banking, realty and automobile sectors are trading higher, lifted by the reduction in CRR. Shares from capital goods, oil, metal and power sectors too are mostly up with strong gains.
PSU stocks are having a good spell in positive territory. Healthcare, FMCG and information technology stocks, which retreated after a fairly decent start, are down in negative territory with notable losses.
From the Bankex, heavyweights State Bank of India (4%) and ICICI Bank (4.8%) are up sharply. HDFC Bank, however, is down marginally.
Axis Bank, Bank of India, Bank of Baroda, Federal Bank, IDBI Bank, IndusInd Bank, Punjab National Bank, Union Bank of India and Yes Bank are up 2.5% - 5.5%.
Allahabad Bank, Bank of Maharashtra, Central Bank of India , Corporation Bank, Dena Bank, Indian Bank, J&K Bank, IOB, Oriental Bank of Commerce, Punjab & Sind Bank, State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore, Syndicate Bank, Uco Bank, United Bank and Vijaya Bank are all up in positive territory with handsome gains.
Realty stocks DLF (4%), HDIL (11%), Unitech (5%), Phoenix Mills (11%) and Indiabulls Real Estate (5.5%) are up sharply. Anant Raj Industries, Godrej Properties, Oberoi Realty, Prestige Estates and Sobha Developers are also trading notably higher.
In the automobile space, Hero Motocorp, Maruti Suzuki, Mahindra & Mahindra and Tata Motors are up 1% - 3.5%. Bajaj Auto is trading flat, while Ashok Leyland is trading nearly 2% up.
Capital goods sector heavyweights Larsen & Toubro and BHEL are up 3.5% and 2.6%, respectively. AIL, Bharat Earth Movers, Bharat Electronics, Crompton Greaves, Havells India, Jindal Saw, Praj Industries, Punj Lloyd and Suzlon Energy are also up with impressive gains.
Bharti Airtel, GAIL India, Jindal Steel & Power, Reliance Industries, Sterlite Industries, Tata Power and Tata Steel are all trading sharply higher.
Meanwhile, Wipro, Tata Consultancy Services, Infosys and Infosys are trading lower by 2% - 2.6%. FMCG heavyweights ITC and Hindustan Unilever are down 3.2% and 0.6%, respectively. Among the pharma stocks in the Sensex, Dr Reddy's Laboratories is down 2.6%, while Cipla and Sun Pharmaceuticals Industries are trading lower by 1.3% and 0.7%, respectively.