Markets reacted positively as RBI MPC kept interest rate unchanged at 6.5 per cent and changed its stance from 'withdrawal of accommodation' to 'neutral'
Benchmark indices reacted positively to Shaktikanta Das-led MPC's decision to maintain interest rates at 6.5 per cent while shifting its stance to 'neutral' at the same time. BSE Sensex surged over 500 points during the morning trading session, whereas NSE Nifty climbed more than 160 points, surpassing the 25,100 level.
Nifty Bank surged by over 1 per cent during the morning trading session and surpassed the 51,600 level mark as the decision was largely in-line with market expectations.
At 11:05, BSE Sensex was trading at 82,203.68 level mark, up by nearly 560 points.
From the Sensex pack, SBI, Axis Bank, Tata Motors, Bajaj Finance and Bharti Airtel were the top gainers. Whereas, Nestle India, ITC, Hindustani Unilever, HDFC Bank and Reliance were among the top losers.
"The market's positive reaction, particularly in mid and small-cap stocks, shows a growing sense of optimism. Sectors like power, telecom, and financial services have rallied, perhaps driven by hopes that stable rates could support growth without stoking inflationary pressures in the near term," said Sonam Srivastava, founder and fund manager at Wright Research.
This marks the tenth consecutive time the central bank has opted for a pause. While announcing the monetary policy statement on Wednesday, RBI Governor Shaktikanta Das mentioned that 'Flexible inflation targeting has served us well.'
“The prevailing and the expected inflation growth balance have created congenial conditions for a change in monetary policy stance,” RBI governor said.
While the RBI Governor mentioned that food inflation pressures may ease later in the fiscal year, the ongoing geopolitical turbulence might slightly dampen the outlook.
"Although inflation has stayed below 4 per cent for the past two months, the risk of rising food prices is high. Additionally, rising conflicts in the Middle East threaten to disrupt supply chains and affect global energy prices, potentially impacting the domestic economy. China's recent announcement of economic stimulus has driven up global commodity prices, especially for industrial metals, over the last month," said Anil Rego, founder and fund manager at Right Horizons.
CPI inflation for 2024-25 is expected to be 4.5 per cent, with estimates of 4.1 per cent for Q2, 4.8 per cent for Q3, and 4.2 per cent for Q4.