As widely anticipated, the monetary policy action was on the expected lines, and therefore, Indian equity benchmark indices remained steady after the announcement. The Sensex and Nifty 50 were trading 0.35% higher at 65,861.74 points and 19,614.85 points, respectively.

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All the sectoral indices are trading in the green as the Reserve Bank of India's Monetary Policy Committee (MPC) kept repo rate unchanged at 6.5% and standing Deposit Facility and Marginal Standing Facility rates were also left unchanged at 6.25% and 6.75%, respectively.

According to Santosh Meena of Swastika Investmart, the RBI's decision to maintain the status quo in its policy has been received positively by the market, despite growing concerns about rising inflation on a global scale. "Nevertheless, the impact of this decision is expected to be limited, as the market's attention is anticipated to shift towards global market dynamics, notably the dollar index and US bond yields."

On Nifty, Meena said that Nifty has managed to surpass the 50-day moving average (DMA), suggesting potential for a further recovery towards the 20-DMA level of 19,800. However, a significant bullish momentum is projected to materialise only upon breaching the 19,800 mark.

"A completely in line with expectations policy is neutral from the market perspective. Not only the policy rates but the growth and inflation targets for FY24 remain unchanged. More than this status-quo statement from the MPC, tonight’s job numbers from the US will determine the market trend in the near-term. Rate sensitives like banks will start discounting the positive Q2 results expected in the coming days," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"The warning from the governor that the central bank will resort to OMOs to absorb excess liquidity if necessary has pushed the 10-year bond yields up marginally," Vijayakumar said.

Could Bank Nifty scaled 50,000 this fiscal?

"In consideration of the upcoming election year, it is projected that efforts will be made to keep inflation under control. Moreover, a significant drop of 16% in crude prices from its peak is anticipated, which is poised to aid in managing core inflation," said Ravi Singhal, CEO, GCL Broking.

As a result, Singhal said there is a possibility that Bank Nifty could potentially reach up to 50,000 within this fiscal year. This projection is further reinforced by the provisions laid out in the budget.

According to Vinod Nair, Head of Research at Geojit Financial Services, "On a positive note, interest rates haven't increased as anticipated, however they are expected to remain elevated for an extended period. This will have an implication on rate-sensitive sectors like banking, auto, core industries, and heavy-weighted balance sheet companies. The elevated global bond yields and appreciation of the US dollar will affect the domestic economy and capital flows."

However, Nair added that it shouldn't have a deep overhang effect on the economy but rather a mixed bias in the short term. "The inclusion of government securities in the global bond index and moderation in inflation, like food and international commodity prices, will support INR and domestic corporate profit even in a volatile global currency market."

This is the fourth consecutive time the central bank has left policy rates untouched. The decision was taken unanimously at the central bank's bi-monthly MPC meeting, said RBI Governor Shaktikanta Das.

The MPC also retained its stance of remaining focussed on “withdrawal of accommodation.”

Das said that inflation will likely ease in September, but added that that overall outlook is clouded by uncertainties. The retail inflation is expected to be 5.4% for the current fiscal and reduce to 5.2% in the next fiscal, he said.

However, food inflation may not see sustained easing in the current October-December quarter, added the RBI Governor.

"Global headline inflation is easing but rules above the target of many major economies. Sovereign bond yields have firmed up, US dollar has appreciated, and equity markets have corrected," the RBI Governor said, adding that India is poised to become the new growth engine of the world.

On GDP growth, the MPC's forecast for 2023-24 was left unchanged at 6.5%.

First Published:Oct 6, 2023 10:44 AM IST