The Reserve Bank of India's (RBI) mandate for banks to maintain Incremental Cash Reserve Ratio (CRR) at 10% of the net demand and time liabilities (NDTL) between May 19-July 28 engineered intraday correction in the stock markets on Thursday.
While analysts find the announcements broadly in line with the Street's expectations, the upward revision of FY24 inflation estimates and the governor's tone appeared hawkish to them with a potential to impact markets going ahead.
The banking regulator kept the repo rate unchanged for the third time at 6.5% while retaining the FY24 GDP forecasts of 6.5%. RBI Governor Shaktikanta Das revised the FY24 inflation upwards to 5.4% from an earlier 5.1%.
The Nifty50 was trading 83.95 points or 0.43% lower at 19,548.60, while the S&P BSE Sensex traded at 65,700.69, lower by nearly 300 points or 0.45% over the previous closing led by selling pressure in banks, auto, realty, and FMCG stocks.
Here are analysts' views on the likely impact of the RBI policy on stock markets:
The RBI governor's decision to maintain unchanged policy rates, as widely anticipated, was overshadowed by a notable upward revision in the inflation forecast. Additionally, the implementation of a 10% incremental CRR on the growth in NDL between May 19-July 28 for banks added to the market's unease.
Presently, the market sentiment appears to be largely unaffected by the policy changes. However, the short-term market structure seems to lean towards a sell-on-rise pattern. This is partly due to the global market's nervousness, exacerbated by the jump in crude oil and other commodity prices, posing notable challenges for the Indian market.
Looking ahead, the focal point of market attention is expected to shift toward the impending US inflation figures scheduled for release this evening. There's a discernible risk that the Nifty index might experience a decline toward levels around 19,191 and 18,888 unless it manages to surpass the 20-Day Moving Average (20-DMA) threshold of 19,650.
Read more:
