Mumbai, Oct 4 (IANS) The benchmark Sensex declined by 100 points after opening 250 points higher on Friday over RBI’s revision of growth forecast to 6.1 per cent for 2019-20 from 6.90 earlier.
“..real GDP growth for 2019-20 is revised downwards from 6.9 per cent in the August policy to 6.1 per cent — 5.3 per cent in Q2:2019-20,” the RBI said in its statements.
“GDP growth for Q1:2019-20 was significantly lower than projected. Various high frequency indicators suggest that domestic demand conditions have remained weak,” it added.
At 12.54 p.m., the Sensex was down 97.09 points at 38,009.78 while the Nifty fell by 73.40 points at 11,240.60.
The Reserve Bank on Friday slashed the lending rate by 25 basis points for the fifth time in 2019.
The repo rate (one basis point is one-hundredth of a per cent) now stands at 5.15 per cent from 5.40 per cent.
In a unanimous decision by the committee all the members of the MPC voted to reduce the policy repo rate and to continue with the accommodative stance of monetary policy.
“Chetan Ghate, Pami Dua, Michael Debabrata Patra, Bibhu Prasad Kanungo and Shaktikanta Das voted to reduce the repo rate by 25 basis points,” the RBI statement said.
However, Ravindra H. Dholakia voted to reduce the repo rate by 40 basis points.
The central banks took into account the high frequency indicators which suggested that services sector activity weakened in July-August. Indicators of rural demand, viz., tractor and motorcycles sales, contracted.
Besides, Industrial activity, measured by the index of industrial production (IIP), weakened in July 2019 (y-o-y), weighed down mainly by moderation in manufacturing.
The decision of a 25 bps rate cut came as the domestic product (GDP) growth rate slumped to 5 per cent in Q1:2019-20, extending a sequential deceleration to the fifth consecutive quarter.