It was a bold move by the RBI that it has undertaken the rate cut and as a net result the market has welcomed the same and Nifty has touched a high of 5140.
The Infrastructure and capital goods sector stocks have also given a thumbs up to the rate cut as these are rate sensitive stocks. These stocks have rallied on the bourses after the Reserve Bank of India (RBI) on Tuesday cut the cash reserve ratio by 50 basis points and injected Rs 32,000 crore into the system to ease liquidity.
To make it simple we can say that CRR is the amount of deposits the banks are required to keep with RBI in cash, has been reduced to 5.5% from 6% with effect from January 28. The short-term lending rate (repo) has been kept unchanged at 8.5%. With additional liquidity on account of the CRR cut, there is a possibility that banks may reduce interest rates to attract borrowers. L&T, IRB Infra, GMR Infra gained between 5.5% and 8%.
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