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Sensex and Nifty Recover as RBI Raises Repo Rate
India’s main share-market measures fell after the central bank raised an important interest rate.
But investors began buying shares that had become cheaper after markets fell for eight weeks.
This helped the Sensex rise about 450 points from its lowest point of the day.
The Nifty also climbed back above 22,700.
The Reserve Bank of India raised its repo rate from 5.25% to 5.5%.
It also said its approach would now be more focused on tightening policy.
The governor said future decisions would depend on inflation and economic growth.
Some banking shares rose after the announcement.
Analysts said investors had already expected the rate increase.
At 11 am Wednesday, the Sensex was down 76.47 points at 72,991.34, while the Nifty fell 71.10 points to 22,705.
The Sensex rebounded about 450 points from its intraday low, and the Nifty moved back above 22,700 amid value buying.
The RBI’s Monetary Policy Committee raised the repo rate by 25 basis points, from 5.25% to 5.5%, its first increase since February 2023.
The RBI shifted its policy stance from neutral to calibrated tightening; Governor Sanjay Malhotra said future moves would depend on inflation and economic growth.
Analysts said the hike was largely expected, while lower stock valuations and gains in banking shares helped support the recovery after eight weeks of market declines.
- Who
- The Reserve Bank of India’s Monetary Policy Committee, investors and Indian benchmark indices Sensex and Nifty.
- What
- The RBI raised the repo rate by 25 basis points to 5.5%, while the Sensex and Nifty recovered from intraday lows.
- Where
- India’s stock market.
- When
- Wednesday; the article gives an 11 am market update but does not specify a calendar date.
- Why
- Value buying after eight consecutive weeks of declines, and the fact that analysts said the rate hike was largely expected, helped the indices recover.
Rate hike concerns
Reasons for market recovery
Market impact of the RBI decision
Rate hike concerns
A higher repo rate and a shift to calibrated tightening can signal the possibility of further rate increases.
Reasons for market recovery
Analysts said the 25-basis-point hike was largely factored into expectations, limiting its immediate negative effect on equities.
Drivers of share prices
Rate hike concerns
The benchmark indices were still in negative territory late in the morning session after the rate announcement.
Reasons for market recovery
Value buying at lower valuations and support from banking stocks helped the Sensex and Nifty recover from their lows.
Key facts
- Repo rate after hike
- 5.5%, up from 5.25% by 25 basis points
- Previous rate increase
- The RBI’s first repo rate increase since February 2023
- Policy stance
- Changed from neutral to calibrated tightening
- Sensex at 11 am
- 72,991.34, down 76.47 points or 0.1%
- Nifty at 11 am
- 22,705, down 71.10 points or 0.31%
- Sensex recovery
- About 450 points from the day’s low
- Market breadth
- 1,798 stocks advanced, 1,809 declined and 172 were unchanged
Sources
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