By Bharath Rajeswaran
(Reuters) -Indian shares rose on Friday, led by interest rate-sensitive sectors, after the central bank cut interest rates for the first time in nearly five years, as was widely expected, to reignite economic growth.
The Nifty 50 rose 0.35% to 23,684.2 as of 11:45 a.m. IST, while the BSE Sensex added 0.28% to 78,274.35. They were flat ahead of the policy decision.
The broader, more domestically focussed small-caps and mid-caps rose 0.2% and 0.7%, respectively.
The Reserve Bank of India (RBI) lowered the repo rate by 25 basis points to 6.25% and signalled a less restrictive policy approach ahead.
“It was widely anticipated that the RBI would deliver a rate cut and hence the markets have not reacted much,” said Apurva Sheth, head of market perspectives and research at SAMCO Securities.
Nine of the 13 major sectors logged gains, especially the rate-sensitive ones.
Financials rose 0.2%, while auto-related companies gained 1%. Realty stocks jumped 1.5%.
While the rate cut is “a welcome step in the right direction” to support growth, the RBI also has to support the ailing rupee, limiting the scope to lower rates going forward, Sheth said.
The rupee has sunk to record lows, including in the previous session, due to elevated U.S. bond yields and a stronger dollar. It fell marginally after the policy, trading at 87.47 per dollar, close to the record low of 87.58. [INR/]
“Easing rates are expected to widen the gap between U.S. and Indian bond yields, potentially accelerating capital outflows from India, hurting the currency,” said Umeshkumar Mehta, chief investment officer at Samco Mutual Fund.
Among other sectors, metals gained 2.4%, tracking a rise in global metal prices on a softer dollar. [MET/L]
Among individual stocks, Bharti Airtel rose 5% after the telecom operator posted a higher quarterly profit due to a one-time gain and tariff hikes.
ITC fell 2% as the consumer goods maker’s weak profit margins overshadowed volume growth.
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio D’Souza)
