RBI Lowers Rate; Record Low in Rupee

123jump.com Staff
20 Oct, 2008
New York City

Rupee dropped to 49 to a dollar, record in the last eight years. In addition, the RBI lowered the rate full percentage point to 8% to improve liquidity in the short term lending market. Software exporters gained on a fall in rupee and realty stocks rose on a decline in interest rates.

[R]1:00PM New York, 7:30PM Mumbai - Reserve Bank of India cuts repo rate to 8%. IT stocks rose after rupee dropped to eight year low.[/R]

Market Sentiment

Stocks in India rose in volatile trading after the RBI cut the repo rate by full one percentage point.

IT stocks rose as the rupee plummeted to an eight year low to 49 to a dollar as demand for dollar remained high. Rising stocks in Asia and Europe also added impetus to the advance.

In Mumbai, the BSE 30-share Sensex rose 2.5% or 247.74 to 10,223.09, and the CNX Nifty edged up 1.6% or 48.45 to 3,122.80.

Of the stocks traded on the BSE, 920 shares rose, 1643 declined, and 53 shares were unchanged.

Trading Statistics

Daily turnover on BSE stood at 3,684 crore rupees from 4,134.51 crore rupees on Friday. Satyam Computer Services and Wipro rose more than 8.5% each.

RBI Cuts Key Rate to 8%

The Reserve Bank of India reduced its repo rate under the Liquidity Adjustment Facility by 100 basis points to 8% and noted in a statement that “as the global financial situation continues to be uncertain and unsettled” and “this uncertainty is transmitting also to countries outside the epicenter of the crisis.

India too is experiencing the indirect impact of the global liquidity constraint as reflected by some signs of strain in our credit markets in recent weeks.”

Separately, the central bank also cancelled its 10,000 crore rupees bond auction after the interest rate cut.

SEBI to Ensure FII''s Use Stock Lending Facility

The Securities & Exchange Board of India reported that it doesn''t sanction the overseas lending and borrowing activities of foreign institutional investors that are exerting pressure on the local cash market.

Gainers & Losers

IT stocks increased after the rupee fell the most in eight years to 49 a dollar. Wipro rose 9% to 280.65 rupees, Satyam Computer Services jumped 8.7% to 289 rupees, Infosys increased 7% to 1,297.80 rupees and Tata Consultancy Services jumped 9.5%.

Reliance Industries rose 1.2% to 1,321.25 rupees.

Ranbaxy Laboratories gained 2.2% to 261.70 rupees after Daiichi Sankyo acquired 52.5% of Ranbaxy Laboratories.

Bharti Airtel soared 4.6% to 708.05 rupees, ITC jumped 4.07% to 165 rupees and Jaiprakash Associates increased 1.4% to 67.70 rupees.

Grasim Industries declined 8% to 1,190.50 rupees, Reliance Communications fell 0.79% to 232.10 rupees and Tata Power Company slid 3.72% to 720.40 rupees.

India''s largest cement maker by sales ACC fell 6% to 459.05 rupees and Reliance Infrastructure slid 1.87% to 481.55 rupees.

Financial stocks gained. HDFC Bank increased 6% to 1,084.85 rupees, ICICI Bank and State Bank of India rose 1.4% and 5% respectively.

Canara Bank gained 5.05% after net profit jumped 31.84% to 529.43 crore rupees in the second quarter ended September 2008.

Realty stocks rose on the rate cut. Indiabulls Real Estate gained 7.5%, but DLF declined 5.8% to 274.50 rupees and Unitech fell 5.66%.

Automakers were mixed. Mahindra & Mahindra, and Hero Honda Motor fell between 0.7% and 3.4% and Tata Motors and Maruti Suzuki India rose between 0.8% and 5.6%.

Cement stocks fell after Ultra Tech Cement lost 1.1% after net profit fell 2.04% to 368.15 crore rupees in the second quarter ended September 2008.