The Reserve Bank of India on Friday, October 4, cut the repo rate by 25 basis points, from 5.40 percent to 5.15 percent in its fourth bi-monthly policy review. The reverse repo rate was adjusted to 4.90 percent and bank rate at 5.40 percent.
Further, the Gross domestic product (GDP) outlook for the current fiscal (2019-20) was revised to 6.1 percent from 6.9 percent. For fiscal 2020-21, the outlook was revised to 7.2 percent.
The lending rates were reduced in a bid to reverse the consumption slowdown and shore-up growth.
Further, the Reserve Bank's Monetary Policy Committee (MPC) continued its accommodative stance.
"The MPC also decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target," a policy statement said.
Ahead of the MPC meeting, the benchmark Sensex was trading over 200 points higher.
At 10.36 am, the Sensex was up 201.44 points at 38,308.31 from its previous close of 38,106.87. It opened at 38,401.49.
The broader Nifty was also up 46.10 points at 11,360.10.
Suvodeep Rakshit, Vice President & Sr Economist, Kotak Institutional Equities said with inflation remaining within its comfort range, despite recent onion price increases, revisions to its growth forecast warrant a sharper-than-usual rate cut in the October policy.
"We pencil in a 40 bps of rate cut which should be a signal to the market that the MPC is not quite done as it frontloads the remaining couple of rate cuts in the cycle," Rakshit added.
(With inputs from IANS.)