RBI Holds Repo Rate At 5.25%; Sensex Trims Gains, Nifty Turns Negative

Indian benchmark indices erased a major portion of their early gains on Wednesday after the Reserve Bank of India (RBI) kept key interest rates unchanged, prompting investors to reassess the policy outlook despite supportive global cues.

At around 11:40 am, the Sensex was up 275.77 points, or 0.35%, at 78,704.72 after rising more than 380 points earlier in the session. The Nifty slipped into the red, falling 17.25 points, or 0.07%, to 24,597.65. The benchmarks have now shown divergence for the third consecutive session since the introduction of the new closing auction mechanism for F&O stocks.

Among sectoral indices, Nifty Realty emerged as the top performer, rising 2.05%, followed by Nifty Auto, up 1.17%, and PSU Bank, which gained 0.69%. Infrastructure, Consumer Durables, Metal and IT indices also traded in positive territory. On the downside, Nifty Private Bank declined 0.53%, while FMCG fell 0.45% and Pharma slipped 0.36%. The Nifty Smallcap 100 rose 0.65%, outperforming the Nifty Midcap 100, which gained 0.10%.

RBI Keeps Rates Unchanged

The RBI's Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, unanimously kept the repo rate unchanged at 5.25% while retaining its neutral policy stance, in line with market expectations.

The central bank raised its FY27 GDP growth forecast to 6.7% from the earlier estimate and lowered its inflation projection to 5%. Governor Malhotra said inflation is likely to peak during the September quarter before moderating, adding that the domestic economy performed better than expected during the June quarter.

The policy decision came as the RBI continues to monitor inflation risks arising from elevated crude oil prices and uneven monsoon rainfall before considering any policy change.

Global Markets Support Sentiment

Global cues remained supportive, limiting the downside in domestic equities. Asian markets traded firmly higher, with South Korea's Kospi surging about 4% and Japan's Nikkei 225 gaining nearly 3%. China's Shanghai Composite and Hong Kong's Hang Seng also traded in positive territory.

US markets ended sharply higher overnight, while Wall Street futures pointed to another firm opening, aided by optimism over corporate earnings and easing geopolitical concerns.

The rupee also strengthened by 39 paise to 94.89 against the US dollar after progress in US-Iran talks eased crude oil prices, improving sentiment towards emerging markets.