Key indices fell on Thursday after a volatile session as the Reserve Bank of India maintained a hawkish tone while keeping the repo rate and the policy stance unchanged in line with market expectations.
Sensex shed 581.79 points, or 0.7%, to close at 78,886.22 and the broader Nifty index slipped 180.50 points, or 0.7%, to 24,117 points.
The RBI kept the repo rate unchanged at 6.5% for the ninth consecutive time and held on to the policy stance of “withdrawal of accommodation”. While this was in line with market expectations, the central bank’s hawkish comments on “stubborn” food inflation likely dampened investor sentiment.
Dhiraj Relli, MD and CEO of HDFC Securities, says a rate cut seems unlikely in the near term as the RBI remains vigilant to ensure that inflation moves sustainably towards the target, which could take some time.
Lakshmi Iyer, CEO – Investments and Strategy at Kotak Alternate Asset Managers, said, “The RBI does not seem to be under any duress to act just because of global developments. Markets to be guided by development on the global policy front, domestic inflation, and monsoon progress.”
While key indices rose in early trades on Thursday, they failed to hold on to the gains amid continued selling by foreign portfolio investors (FPIs), who offloaded $312.8 million (`2,626.73 crore) worth of shares, according to provisional data.
The momentum in equities globally, including in India, has been hit due to multiple factors such as the US recession worries, unwinding of yen carry trades and the West Asia geopolitical crisis. These factors continued to weigh on investor sentiment even on Thursday.
With this, the benchmark indices have now fallen in four of the past five trading sessions. Market participants believe the volatility is likely to persist.
Investors will also keep an eye on the last set of April-June earnings from domestic companies. According to a review by Mirae Asset Mutual Fund, the aggregate profit of 39 Nifty 50 companies, which have declared their results, has grown 5% year-on-year, leading to a 1.2% downgrade in FY25 earnings forecast. The fund manager said the aggregate performance was hit by a sharp drag from global commodities.
The selling on Thursday was led by information technology, metals, energy, and real estate sectors. The Nifty IT index was the worst hit as it fell nearly 2%.
The broader market too came under selling pressure on Thursday though they fared better than the large-caps. The BSE Smallcap index ended 0.2% lower, while the BSE Midcap index fell 0.4%.