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RBI cuts repo rates. Markets down as DMK pulls out from the Centre

The Reserve Bank of India has announced a cut of 25 basis points in the repo rate to bring it down to 7.50%. The reverse repo rate now stands at 6.50%. Announcing the decision after its mid quarter (Jan-March) monetary policy review, the Reserve Bank of India (RBI) indicated that “competitive interest rate” is necessary for reviving the investment in the Indian economy.

Food inflation continues to haunt RBI while the central bank observed some bit of softening in non-food manufacturing products inflation. A wedge between wholesale price and consumer price inflation is posing a challenge for RBI in anchoring inflationary expectations.

However RBI is extremely concerned about the rising inflation. The statement said that “Worryingly, retail inflation continued on the upward path that set in from October 2012, with the new combined (rural and urban) CPI inflation at a high of 10.9 per cent in February 2013 on sustained price pressures from food items, especially cereals and proteins.”

DMK pulls out from the centre

Amidst high political drama, the DMK has pulled out from the UPA at the centre over the Lankan tamils issue. The UPA had 250 seats along with the outside support of 49 seats. The DMK constituted 18 seats. It becomes interesting now to watch the turn of events, after the DMK has pulled over.

This political drama has led to the markets spiral down in the trade today.

The Sensex has moved down by 273.61 points at 19019.59, and the Nifty has fallen 88.90 points at 5746.35.

Top losers on the Sensex include Jindal Steel which is down by 4.5%, BHEL down by 3.9%, Hero Moto Corp falling by 3.3%. Heavyweight ONGC is down by 2.9%. Sterlite Industries has also seen a decline of 2.9%.

However stocks such as GAIL, Sun Pharma, Bajaj Auto, ITC and Maruti Suzuki are on the upside.

Earlier : Market falls as DMK pulls out from UPA. LITL loses 5%. /



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