RBI monetary policy today: This is how Nifty may perform after the central bank announces its decision
Nifty is performing positively ahead of the RBI's monetary policy, with expectations that it may soon surpass its all-time high of 18,887.60. Majority of experts believe RBI may choose to keep repo rate unchanged for second consecutive policy.
Nifty has broadly performed on a bullish note ahead of RBI's monetary policy scheduled on Thursday. The benchmark is currently near the 18,730 level. But in the past five trading sessions, this 50-scrip index has gained by more than 1%. With RBI's policy taking the limelight, Nifty and broadly the market sentiment is looking positive on June 8. Expectations are that Nifty may soon cross its lifetime high of 18,887.60, whether RBI's policy will do the trick will be keenly watched.
It is expected that RBI will opt for a second-consecutive status quo in repo rate owing to the latest economic-inflation mix.
On Wednesday, Nifty 50 ended at 18,726.40 up by 127.40 points or 0.68%.
In 5 trading sessions, Nifty has gained by 207.65 points or 1.12%. In a month, the upside is around 462 points or 2.53%. This benchmark is just 161.2 points away from its all-time high of 18,887.60.
How will Nifty perform amidst RBI policy?
According to Sonam Srivastava- Founder of Wright Research an investment advisory firm, ahead of the Reserve Bank of India's (RBI) bi-monthly monetary policy review, Indian stock indices, including the Nifty, have been trading steady. Most analysts anticipate that the RBI will maintain the repo rate at 6.5% due to declining inflation, currently at an 18-month low. This comes after a period of consistent tightening of monetary policy since mid-2022, which has significantly lowered inflation.
Read here: RBI monetary policy: This is why governor Shaktikanta Das may not be able to cut repo rate just yet
Meanwhile, Sreeram Ramdas - Vice President at Green Portfolio PMS said, "Nifty is already pricing in an interest rate pause and bullish comments on the economy from the governor. The stump in inflation and slowdown in overall food inflation will further add glimmer to the meeting. We expect markets to act positively and being supportive for Autos and IT’s in the nifty index. The financials, which has 37% weightage in the Nifty, have already seen a sharp rally in anticipation of bright economic prospects, and we do not expect a significant move here."
Also, Rupak De, Senior Technical at LKP Securities said, "Market participants are anticipating a dovish stance from the RBI governor, contributing to a positive sentiment in the market. Technically, support for the Nifty is positioned at 18650, while resistance is expected around the range of 18880-18900."
For investors, Srivastava said, "Despite a pause in April, the RBI has raised the repo rate cumulatively by 250 basis points since May 2022 to combat inflation and that puts pressure on economic growth. Given the absence of a clear market trend, investors and traders are advised to closely monitor market developments and adapt their strategies as necessary."
Why status quo? Vimal Nadar- Head of Research at Colliers India explained that RBI is likely to remain focused on withdrawal of accommodation and keep the repo rate unchanged at 6.5%, in a bid to progressively align inflation within its target while maintaining growth. Consumer price index (CPI) eased to an 18-month low at 4.7% during April 2023 led by monetary policy tightening measures undertaken during 2022, however the high frequency indicators will be closely watched in the current volatile global environment.
Read here: Rate hike or pause? Here's how RBI's monetary policy decision on June 8 may impact your home loan EMIs
Nadar added, “At 7.2% for FY 2022-23, India’s GDP has outperformed the market expectations and is a testament to the promising trajectory of the economy amidst global challenges. Indian economy continues to be resilient, with GDP growth pegged at 6.5% for 2023-24, aided by strong domestic demand and scaling up of capital investment.”
RBI has started fiscal FY24 with a status quo in the rate hike cycle.
Currently, the policy repo rate under the liquidity adjustment facility (LAF) is unchanged at 6.50%. Subsequently, it also kept the standing deposit facility (SDF) rate unchanged at 6.25%, while the marginal standing facility (MSF) rate and the Bank Rate were also unchanged at 6.75%.
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