Mumbai Equity Markets Decline as RBI Holds Policy Rate Steady
Mumbai’s equity benchmark indices, the Sensex and Nifty, extended their downward trajectory on Thursday following the Reserve Bank of India’s (RBI) decision to maintain its policy rate unchanged for the ninth consecutive meeting. The central bank’s stance, which was influenced by persistent food inflation, contributed to the negative sentiment in domestic markets.
The 30-share BSE Sensex fell sharply by 570.09 points to 78,897.92, while the NSE Nifty experienced a significant decline of 178.2 points, settling at 24,119.30. This downward movement follows a period of heightened volatility, driven by continuous foreign fund outflows and weak performance in US markets.
The RBI’s decision comes after a series of six consecutive rate hikes between May 2022 and April 2023, totaling 250 basis points. In its latest bi-monthly monetary policy announcement, RBI Governor Shaktikanta Das confirmed that the Monetary Policy Committee (MPC) has opted to keep the repo rate steady at 6.5 percent. Das emphasized that the committee remains vigilant regarding elevated food inflation.
Umeshkumar Mehta, Chief Investment Officer at SAMCO Mutual Fund, observed that the RBI’s cautious approach reflects a broader wait-and-see strategy, awaiting signals from the US Federal Reserve before making further rate adjustments. “The RBI MPC is in wait and watch mode, and stock markets are likely to continue consolidating in the interim,” Mehta noted.
Among the prominent Sensex constituents, Power Grid, Infosys, Larsen & Toubro, JSW Steel, UltraTech Cement, and Asian Paints were notable laggards. Conversely, Tata Motors, HDFC Bank, Tech Mahindra, and ITC showed some resilience during the initial trading session.
In global markets, Asian indices displayed mixed performances. While Shanghai and Hong Kong saw gains, Seoul and Tokyo faced declines. US markets also closed lower on Wednesday, further influencing global market sentiment.
Foreign Institutional Investors (FIIs) contributed to the domestic market’s woes by offloading equities worth Rs 3,314.76 crore on Wednesday. Over the past four days, FIIs have withdrawn Rs 20,228 crore from the Indian cash market. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed this trend to India’s elevated valuations, concerns about potential US recession, and issues related to the unwinding of the yen carry trade.
In commodities, global oil prices saw a modest increase, with Brent crude climbing 0.17 percent to USD 78.46 per barrel.
In a contrasting development, the BSE Sensex had a strong performance on Wednesday, surging 874.94 points or 1.11 percent to close at 79,468.01. The index had earlier surged 1,046.13 points to a high of 79,639.20. Similarly, the NSE Nifty rose by 304.95 points or 1.27 percent to 24,297.50, with an intraday peak of 24,337.70.
As the markets adjust to these dynamics, investors are expected to remain cautious, balancing the impact of domestic policy decisions with global economic indicators.
