Stock markets slump after RBI holds rate, lowers growth forecast

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Mumbai, Dec 7: Indian equity markets on Wednesday fell sharply after the Reserve Bank of India decided to keep the key lending rates unchanged in its bi-monthly monetary policy.

The RBI has also lowered the forecast for India’s growth to 7.1 per cent from an earlier 7.6 per cent.

The sensitive index of the BSE which was ruling at around 26,334.79 points just ahead of the announcement, slipped to 26,255.88 points — down 136.88 points or 0.52 per cent.

Similarly, the wider 51-scrip Nifty of the National Stock Exchange (NSE) fell by 35.20 points or 0.43 per cent to 8,107.95 points.


The Sensex has touched a high of 26,540.83 points and a low of 26,252.09 points during the intra-day trade so far.

The BSE market breadth was tilted in favour of the bears — with 1,233 declines and 1,276 advances.

The Reserve Bank of India (RBI) on Wednesday kept the key lending rates at 6.25 per cent during the last monetary policy review of the calendar year 2016.

With this, the repurchase rate, or the short-term lending rate charged by the central bank on borrowings by commercial banks, remains unchanged to 6.25 per cent. The reverse repurchase rate also automatically stands lowered to 5.75 per cent.

India’s central bank lowers growth forecast to 7.1%

Mumbai, Dec 7 (IANS) The Reserve Bank of India (RBI) on Wednesday lowered the country’s growth forecast for 2016-17 to 7.1 per cent from 7.6 per cent during its fifth bi-monthly monetary policy review.

“The outlook for GVA (gross value added) growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 basis points in Q2 and the effects of the withdrawal of SBNs (specified bank notes) which are still playing out,” the Monetary Policy Committee of the RBI said in its monetary policy statement.

The central bank said that the downside risks in the near term could come through two major channels — short-run disruptions in economic activity in cash-intensive sectors and aggregate demand compression associated with adverse wealth effects.

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“The impact of the first channel should, however, ebb with the progressive increase in the circulation of new currency notes and greater usage of non-cash based payment instruments in the economy,” the statement said.

“While the impact of the second channel is likely to be limited. In October 2016, GVA growth in H2 was projected at 7.7 per cent and for the full year at 7.6 per cent.”

“Incorporating the expected loss of growth momentum in Q3 and waning effects in Q4 alongside the boost to consumption demand from higher agricultural output and the implementation of the 7th CPC award, GVA growth for 2016-17 is revised down from 7.6 per cent to 7.1 per cent, with evenly balanced risks.”

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