Indian share markets ended lower today after the Reserve Bank of India (RBI) raised its repo rate by 25 bps to 6.5%. The policy comes amid rising inflation and a falling rupee. The widening current account deficit in an election year is also a key monitorable for the policymakers. At the closing bell, the BSE Sensex finished lower by 85 points and the NSE Nifty finished lower by 10 points. Meanwhile, the S&P BSE Midcap Index ended up by 0.2% while S&P BSE Small Cap Index ended up by 0.3%.
Sectoral indices ended the day on a mixed note with healthcare stocks and energy stocks leading the pack of gainers. While metal stocks and automobile stocks ended the day in red.
Globally, Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.9%, while the Shanghai Composite led the Hang Seng lower. They fell 1.8% and 0.9% respectively. European markets are lower today with shares in London off the most. The FTSE 100 is down 1% while Germany's DAX is off 0.3% and France's CAC 40 is lower by 0.02%.
The rupee was trading at Rs 68.61 against the US$ in the afternoon session.
In the latest development, the monetary policy committee (MPC) of the Reserve Bank today hiked repo rate by 25 basis points to 6.5% in its third bi-monthly monetary policy review of 2018-19.
Repurchase rate, or repo, is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds.
This hike by RBI turns out to be a back to back interest rate increase. In its June policy meet, the rate-setting panel headed by Governor Urjit Patel raised repo rate by 25 basis points to 6.25%. Back then, that was the first rate increase since Narendra Modi came to power in May 2014.
The MPC kept its policy stance neutral at today's meet.
Reverse repo, the rate at which the Reserve Bank borrows money from commercial banks within the country, was adjusted to 6.25%.
The current rate hike comes on the back of rising crude oil prices, hike in the MSP for paddy by a record Rs 200 per quintal, rupee depreciation against the US dollar, impact of HRA revision of inflation and recent farm loan waivers.
Further, it pegged retail inflation at 4.8% for the second half of the current fiscal.
It also kept the GDP forecast for the current fiscal unchanged at 7.4% and saw it at 7.5-7.6% in the second half of the current fiscal.
Note that, the RBI monetary policy statement is one of the most tracked events in the financial world. The chart below shows how India's policy rates stand in comparison with other Asian economies.
India's Policy Rates Compared to Asian Economies
Rate hike or not, at Equitymaster, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies.
The ValuePro team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.
Moving on to the news from the automobiles sector. TVS Motor has registered a sales growth of 18% increasing from 271,171 units in July 2017 to 321,179 units in the month of July 2018.
Total two-wheelers registered growth of 17% with sales increasing from 263,336 units in July 2017 to 307,856 units in July 2018. Domestic two-wheelers recorded growth of 13% with sales increasing from 219,396 units in July 2017 to 247,382 units in July 2018.
Scooter sales of the company grew by 29% from 92,378 units in July 2017 to 118,996 units in July 2018. Motorcycles sales grew by 11% with sales increasing from 109,427 units in July 2017 to 121,434 units in July 2018.
The company's total exports grew by 42% from 50,957 units registered in the month of July 2017 to 72,242 units in July 2018. Two-wheeler exports grew by 38% increasing from 43,940 units in July 2017 to 60,474 units in July 2018.
Besides, three-wheeler of the company grew by 70% increasing from 7,835 units in July 2017 to 13,323 units registered in July 2018.
Speaking of the growth of the Indian economy, one of the major indicators of this is the volume of vehicles sold.
For the first nine months of FY18 at least, the auto industry has done well to grow in double digits after some lean years.
Vehicle sales grew by 11.3% YoY during this period. The best performing of the lot were commercial vehicles (CVs), volumes of which grew by 15% YoY. Two-wheelers also did well growing by around 12% YoY.
TVS Motors share price ended the day down by 0.9%.
To know what's moving the Indian stock markets today, check out the most recent share market updates here.
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