Sensex, Nifty slide as RBI signals tight policy ahead

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Indian stocks on Thursday snapped a four-day winning streak, dragged down by auto and consumer stocks after the Reserve Bank of India pushed forward bets on an interest rate cut, with inflation remaining above target.

The Nifty 50 index closed down 0.49% at 18,634.55, while the S&P BSE Sensex fell 0.47%, at 62,848.64.

the The Monetary Policy Committee of the Reserve Bank of India (MPC) has kept the repurchase rate at 6.50%. For the second meeting in a row, but he indicated that monetary conditions will remain tight for some time amid fears that inflation will remain above the central bank’s target of 4% this year.

Also read: It highlights the monetary policy of the Reserve Bank of India

Overnight index swaps jumped after the policy statement, suggesting that markets now have room for further delays in rate cuts.

“The expectation of a rate cut in CY23 has clearly been pushed forward,” said Amit Kumar Gupta, Founder of Fintrekk Capital.

Stock indices reversed course after surging 0.30% after the decision.

Twelve out of 13 major sectoral indices declined, with the Fast Moving Consumer Goods (FMCG), Automotive and Pharmaceutical sectors losing between 0.8% and 1.1%.

Also read: Indian bond yields rise after the Reserve Bank of India keeps interest rates, inflation above target says

The interest rate sensitive real estate index fell 1.6% and was the biggest sectoral loser. The real estate index rose for six consecutive sessions in the run-up to the RBI interest rate decision, adding 6.59% during the period.

The average capital index fell more than 0.5%, snapping a 13-session winning streak after hitting a new record high in intraday trading.

Amit Kumar Gupta added, “Many small and mid-cap stocks are going up without any specific underlying reason, and most of them are with low trading volumes.” “The game plan remains clear: Buy slowly, sell fast, stay satisfied, and avoid junk.”

Heavyweight IT stocks fell more than 1% on concerns about a rate hike ahead of policy decisions by the US Federal Reserve and European Central Bank next week. All ten components of the IT index recorded losses.