Did the Indian Stock Market React to RBI's MPC Decisions?
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Synopsis
The Indian stock market reacts to the Reserve Bank of India's latest decisions, with both Nifty 50 and Sensex showing slight declines. This article examines the impact of the unchanged repo rate and external factors influencing market trends.
Key Takeaways
- RBI's repo rate remains steady at 5.50 percent.
- Nifty 50 dips below 24,600, reflecting market reactions.
- External influences, particularly US tariffs, impact market dynamics.
- GDP growth forecast retained at 6.5 percent.
- CPI inflation projected at 3.1 percent for 2025-26.
Mumbai, Aug 6 (NationPress) Following the Reserve Bank of India's (RBI) announcement on Wednesday to keep the repo rate steady at 5.50 percent, the benchmark index Nifty 50 saw a minor dip, slipping below the 24,600 resistance threshold.
As of 10:54 am, the Nifty 50 was trading at 24,569, reflecting an intraday decrease of 0.33 percent, while the Sensex was at 80,473, down 0.29 percent. Before the Monetary Policy Committee's decision, both indices had already dropped by 0.08 percent and 0.07 percent, respectively.
Experts suggest that beyond the monetary policy, the market is significantly influenced by US President Donald Trump’s tariff announcements.
The Nifty IT index saw an extended loss of 1.57 percent in the morning trading session. The Nifty Pharma index fell 1.26 percent, while Nifty Realty declined by 2.26 percent.
Among IT stocks, Coforge was the largest loser, dropping 3.49 percent, with major IT stocks witnessing losses between 1 to 2 percent.
On August 6, the RBI monetary policy committee (MPC) unanimously agreed to maintain the repo rate at 5.5 percent, adhering to a neutral monetary policy stance.
A neutral stance aims to neither stimulate nor restrict liquidity, maintaining a balance between controlling inflation and supporting growth.
The RBI Governor noted that while inflation has decreased significantly, there remains volatility in food prices, particularly vegetables. Core inflation, however, has stabilized around 4 percent.
The Central Bank kept its forecast for India’s GDP growth at 6.5 percent for FY 2025-26, despite global uncertainties, largely due to anticipated strong rural demand from a favorable monsoon and substantial government spending on infrastructure projects.
It expects India's CPI inflation to be at 3.1 percent for 2025-26, as steady monsoon progress and robust kharif sowing are likely to help keep food prices stable.
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Point of View
The recent decisions by the RBI highlight a cautious yet necessary approach to balancing inflation control with economic growth. The unwavering repo rate suggests a commitment to stability amidst global uncertainties, emphasizing the importance of sound monetary policy in fostering investor confidence.
NationPress
19/08/2025
Frequently Asked Questions
What was the RBI's repo rate decision?
The RBI decided to maintain the repo rate at 5.50 percent during its latest Monetary Policy Committee meeting.
How did the stock indices perform after the RBI announcement?
Post-announcement, the Nifty 50 fell to 24,569, while the Sensex stood at 80,473, reflecting minor declines.
What external factors are influencing the market?
Experts suggest that US President Trump’s tariff announcements are significantly affecting market sentiment.
What is the RBI's growth forecast for India?
The RBI retained its GDP growth forecast at 6.5 percent for FY 2025-26.
What is the expected CPI inflation for India?
The RBI projects India’s CPI inflation at 3.1 percent for the year 2025-26.
