RBI's surprise move boosts markets amid global woes

Indian stocks and bonds got a boost on Thursday as the Reserve Bank of India (RBI) unexpectedly chose to keep policy rates unchanged at 6.5%, with benchmark indices Sensex and Nifty closing higher for the fifth consecutive session despite mixed global markets.

- Ujjval Jauhari

NEW DELHI : The RBI monetary policy committee (MPC) decision resulted in bond yields dropping and the rupee strengthening. Domestic institutional investors booked profits worth ₹997.08 crore, even as foreign portfolio investors bought a provisional ₹475.81 crore.

MPC took into account the ongoing global economic turmoil, the banking crisis, and its potential impact on India’s growth-inflation dynamic in FY24.

“After raising the repo rate by 250 basis points, RBI seems to have adopted a wait-and-watch approach. Equity and bond markets could justifiably get excited as a knee-jerk reaction as growth and inflation headwinds seem less severe than earlier feared going by the RBI MPC’s latest move and estimates," said Dhiraj Relli, managing director and CEO of HDFC Securities.

A positive is that experts anticipate that interest rates will pause going forward.

Additionally, RBI maintained its FY24 GDP projection at 6.5%, signalling that the economy’s core strength remains intact, which is another positive, analysts said. At 5.2%, inflation is projected to be slightly lower.