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After staying range-bound for most of the early session, Indian stock markets fell after the Reserve Bank of India announced its monetary policy. Sensex ended 215 points lower at 62,410 while Nifty settled at 18560. The RBI today raised key repo rate by 35 basis points (bps) as widely expected, the fifth straight increase. The RBI also said that its battle against inflation was not over yet though it kept the inflation forecast steady at 6.7% for financial year 2022/23.

RBI raised the repo rate by 35 basis points, which is in line with expectations, but the tone of the governor was hawkish. The market was expecting the governor to signal that the rate hike cycle is coming to an end, but this policy shows no signs of it. However, the market is not reacting much to the policy," said Parth Nyati, Founder, Tradingo.

Economists expect another hike by RBI in the current cycle.

"The MPC delivered the 35 bps hike as expected while retaining the stance as 'withdrawal of accommodation.' We continue to expect the focus of MPC to remain in a watchful mode as uncertainties on inflation settle down. We see a possibility of another 25 bps rate hike before a prolonged pause," Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.

The Bank Nifty also shed early gains and ended flat.

Lakshmi Iyer, CEO- Investment Advisory, Kotak Investment Advisors Limited said, "The RBI MPC raised repo rate by 35 basis points to 6.25% with 5-1 vote. While this was ours as well market consensus, it seems like we may not be fully done with the rate hiking cycle. The inflation guard continues to remain. Key to now track FOMC outcome in the coming week. Expect bond markets to give up some gains and trade range bound as global growth concerns dominate."

‘Overall Indian markets still bullish’

Santosh Meena, Head of Research, Swastika Investmart Ltd, said: “Nifty is witnessing some profit booking from the 18888 level; however, the overall texture is still bullish, where 18600–18550 is an immediate demand zone and the 20-DMA around 18440 is the next support level. On the upside, 18735 is an immediate hurdle, and then 18888 and 19000 are the next resistance levels."

Bank Nifty, he said, “is consolidating nicely above the 9-DMA, while the 20-DMA around 42700 is the next important support level. On the upside, 43500 is an immediate hurdle; above this, we can expect fresh momentum towards 44000."

 

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