Sensex, Nifty Recover And Gain Marginally, Ahead Of RBI Policy Outcome

Indian equity benchmarks started Friday on the front foot, recovering from marginal losses in the previous session, but remain jittery ahead of the Reserve Bank of India’s policy outcome.

The 30-share Sensex Index gained over 250 points to 58,549.58 and the broader NSE Nifty rose about 0.3 per cent to 17,441.35, compared to a lower close in the previous session.

That was ahead of an expected rate hike by the country’s central bank, which is aiming to tame persistently high inflation in Asia’s third-largest economy.

The RBI has raised rates twice since May, with a 40-basis-point hike at an unscheduled meeting, followed by 50 basis points in June.

Economists polled by Reuters expected the central bank to hike rates on Friday, but they were split widely between 25 basis points and 50 basis points.

The Indian rupee firmed ahead of the monetary policy decision, supported by overnight weakness in oil prices and the dollar.

“While declining international commodity prices are offering some reprieve, we think elevated inflation rates will continue to warrant some caution for the (RBI) policy outlook,” Rahul Bajoria, chief India economist at Barclays, told Reuters.

The central bank will continue calibrating policy to preserve and foster macroeconomic stability while bringing down inflation, RBI governor Shaktikanta Das said last month, adding that there could be some respite from rising prices in the coming months.

The six-member panel’s three-day meeting of the monetary policy committee began on Wednesday, and it is almost inevitable that it will raise rates to rein in increasing domestic inflation. Repo rates will rise to 5.15 percent, the level they were before the outbreak, if the RBI increases them by at least 25 basis points.

The six-member panel’s three-day monetary policy committee meeting began on Wednesday, and it is almost inevitable that it will raise rates to rein in increasing domestic inflation. Repo rates will rise to 5.15 per cent, the level they were before the coronavirus outbreak if the RBI increases them by at least 25 basis points.

In line with the global trend of monetary policy tightening to cool off inflation, the RBI has so far hiked the key repo rates — the rate at which the central bank of a country lends money to commercial banks — by 90 basis points to 4.90 per cent.

It will be the third consecutive increase if the RBI decides to raise the policy repo rate on Friday. The interest rate at which a nation’s central bank loans money to its commercial banks is known as the repo rate.

“RBI rate action today is unlikely to impact markets. The most likely scenario of a 30 to 35 basis points rate hike is already known and discounted by the market. The market will be looking forward to the RBI’s commentary on inflation, GDP growth for FY23 and other macros like CAD,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told ANI.

Also, the momentum in the domestic market is now influenced by global cues and strong buying by foreign investors, Mr Vijayakumar added..