Stock Market Reacts On RBI Monetary Policy: Central Bank Hopeful Over GDP & Inflation

Equity benchmark indices Sensex and Nifty continued to trade lower on Thursday after the Reserve Bank of India decided to keep the policy rate unchanged for the ninth time in a row, saying food inflation remains stubborn.
Announcing the third bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent. He said MPC will remain watchful of elevated food inflation.
Stock Market Reaction On RBI Monetary Policy
Extending its early trade decline, the 30-share BSE Sensex tumbled 570.09 points to 78,897.92. The NSE Nifty tanked 178.2 points to 24,119.30.
The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
“RBI MPC is in wait and watch mode and has kept the interest rates unchanged, waiting for clues from the largest Central Bank of the world, the US Federal Reserve, before acting. Stock markets will continue to consolidate in the meanwhile,” said Umeshkumar Mehta, CIO, SAMCO Mutual Fund.
“During the last four days, FIIs have sold Rs 20,228 crore in the cash market. This is a rational thing to do given India’s elevated valuations and the concerns surrounding recession fears in the US and further issues relating to the unwinding of the yen carry trade,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
RBI MPC Meet: Inflation View
The Reserve Bank on Thursday retained the inflation projection at 4.5 per cent respectively for the current fiscal amid expectations of a normal monsoon.
Assuming a normal monsoon, and taking into account the 4.9 per cent inflation print in Q1, he said, CPI inflation for 2024-25 is projected at 4.5 per cent, with Q2 at 4.4 per cent; Q3 at 4.7 per cent; and Q4 at 4.3 per cent.
CPI inflation for Q1FY26 is projected at 4.4 per cent, he said, adding, the risks are evenly balanced.
Das further said that the headline CPI inflation edged up to 5.1 per cent in June 2024 due to higher-than-expected food inflation.
RBI MPS Meet: GDP Growth View
RBI Governor Shaktikanta Das, outlined the economic growth with real GDP growth of 7.2 per cent for the fiscal year 2024-25 and headline inflation eased to 5.1 per cent in June, on Thursday.
Das said, “Real GDP growth for 2024-25 is projected at 7.2 per cent with Q1 at 7.1 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent and Q4 at 7.2 per cent. Real GDP growth for Q1 2025-26, this is something which we are giving for the first time, is projected at 7.2 per cent. The risks are evenly balanced.”
He added, “We have slightly moderated the growth projection for the first quarter of the current financial year in relation to the projection we gave in the previous MPC in June. This is primarily due to updated information on certain high-frequency indicators which show lower than anticipated corporate profitability, general government expenditure and core industries output.”
(With Inputs From Agencies)