Frontline indices S&P BSE Sensex and Nifty50 were largely steady after sentiments improved as the Reserve Bank of India (RBI) hit the pause button again and decided to keep the key benchmark policy rate (repo rate) unchanged at 6.5 percent on Thursday (June 8). While the Sensex was trading at 63,321.40, up by 150 points, the broader market Nifty50 rose to 18,770.50, higher by 44 points or 0.24 percent.
The market breadth was somewhat in favour of the bulls with 22 stocks advancing in the 50-stock Nifty50 at around 11:30 am. The top gainers were JSW Steel, NTPC, Power Grid, ONGC, HDFC Bank, while the biggest losers were Kotak Bank, Eicher Motors, BPCL, Sun Pharma, Axis Bank, among others.
"The market will undoubtedly feel relieved following today's RBI Policy stance as the repo rate has remained unchanged. the Indian equity markets are expected to remain stable, with no significant corrections anticipated in the Bank Nifty index. Declining CPI inflation and a forecast of normal monsoon further support this outlook," said Palka Arora Chopra, Director, Master Capital Services Ltd.
RBI Governor Shaktikanta Das has announced that the Monetary Policy Committee (MPC) has unanimously decided to keep the policy repo rate unchanged at 6.50 percent for the second consecutive time.
The standing deposit facility (SDF) rate also remains unchanged at 6.25 percent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 percent.
The MPC also decided by a majority of five out of six members to remain focused on ‘withdrawal of accommodation’ to ensure that inflation progressively aligns with the target while supporting growth, the Das said.
Remaining vary of the future trajectory of inflation, Das noted that the pace of monetary tightening has slowed in recent months, but uncertainty remains as inflation continues to rule above targets across the world.
The central bank has lowered its retail inflation projection for FY24 to 5.1 percent, from 5.2 percent. The RBI Governor also said that the headline inflation is above the target of 4 percent and expected to remain so during the rest of the year.
"There were no surprises on policy front as we were expecting RBI to hold the rates at 6.5 percent. The central bank kept its stance unchanged to 'withdrawal of accommodation' as it maintains its focus on inflation, citing delay in monsoon, El nino impact and geopolitical uncertainties as upside risks to inflation. We expect FY24 inflation at 4.9 percent slightly lower than RBI's estimate of 5.1 percent, as base effect turns favorable and imported inflation eases," said Ritika Chhabra- Quant Macro Strategist at Prabhudas Lilladher PMS.
"Even though the MPC's rate decision and stance have come on expected lines as pause and withdrawal of accommodation respectively, the Governor's commentary can be interpreted as positive. The central bank's projection of FY24 CPI inflation has come at 5.1 percent, lower than 5.2 percent projected in the previous meeting. This indicates that the MPC has come to the end of this rate hiking cycle. If the monsoon is normal and the global scenario is favourable, the MPC may think about a rate cut by end CY2023 or early 2024. From the stock market perspective, this is positive," said Dr VK Vijayakukar, Chief Investment Strategist at Geojit Financial Services.
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