Indian stock market erased all morning gains, with Sensex and Nifty closing in the red after RBI’s hawkish stance with a wait and watch approach offset the impact from falling oil prices and Treasury bond yields.
Sensex declined nearly 117 points to close at 74,243, while Nifty 50 ended the session at 23,367. This came even as India VIX, which measures volatility in the Indian stock market, declined nearly 1% to 15.75.
Trent shares dropped more than 2% to lead losses on Sensex, while TCS, Tata Steel, NTPC, Bharti Airtel, HCL Tech and Reliance Industries (RIL) shares fell 1-2%. On the other hand, Hindustan Unilever (HUL), Adani Ports, Axis Bank and Bajaj Finance shares gained around 2% each to lead gains.
Broader markets also closed in the red, with Nifty Midcap 100 index falling 0.35% and Nifty Smallcap 100 index closing with marginal losses. Sectorally, Nifty Metal tumbled 1.6% to lead losses, while Nifty Media surged more than 3%. Around 1,694 stocks declined on NSE, while 1,623 advanced and 94 remained unchanged.
RBI MPC meet outcome
Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday announced that the central bank’s Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate unchanged at 5.25% as it weighed the impact of rising energy prices and supply disruptions caused by the West Asia crisis. Moreover, the RBI raised the limit for investments by Non-Resident Indians, Overseas Citizens of India in equity instruments.
Rupee gains sharply after RBI MPC meet outcome
Rupee recorded its biggest single gain against the US dollar since April 2 on Friday. The Indian currency gained 0.9% to close at 94.9450 against the American greenback, as against the previous closing level of 95.7850.
Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities explained that RBI’s key steps including the expansion of the FAR bond route, relaxation of FPI debt investment limits, a temporary FCNR(B) deposit window, and concessional FX swap facilities, all aimed at supporting the rupee and improving dollar inflows.
“While the RBI acknowledged risks from elevated crude oil prices and revised inflation forecasts higher, it reiterated that it would do "whatever it takes" to prevent disorderly moves in the currency market. The central bank also highlighted that forex reserves remain comfortable at $682 billion, providing a strong buffer against external shocks,” he noted. “Overall, the policy is mildly supportive for the rupee, with the focus now shifting back to crude oil prices, FII flows, and upcoming US Non-Farm Payrolls data,” he added.
What lies ahead?
The proposal to increase investment limits for NRIs and OCIs in listed equity instruments without Sebi registration, and to extend the same facility to all individual Persons Resident Outside India (PROIs), is a significant step toward broadening participation in Indian capital markets, which is expected to improve market depth, liquidity and long-term capital inflows, said Arun Poddar, CEO of Choice International.
While the measures taken to attract FII inflows in the debt market will likely provide short-term support for Dalal Street, analysts advised caution over the RBI’s hawkish policy stance. While the RBI maintained its policy repo rate as per expectations, the tone was much more cautious than in previous meetings.
While hawkish rhetoric without an accompanying rate hike provides a temporary respite for equity markets, it does not constitute an unequivocal endorsement of investment, particularly in highly rate-sensitive sectors such as real estate, automotive, and consumer discretionary goods, said Vipul Bhowar, Senior Director, Head of Equities at Waterfield Advisors.
Technical view on Nifty
Going ahead, the 23,230–23,200 zone will act as an immediate support area for the Nifty 50 index, said Sudeep Shah, Head of Technical and Fundamental Research at SBI Securities. He added that a breach below 23,200 could drag the index towards the 23,050 level.
On the upside, the 23,530–23,550 zone will act as an immediate hurdle, according to the analyst. Any sustained move above 23,550 could trigger fresh momentum and lead to an upside move towards the 23,700 level, he added.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
