Indian Stock Market: The Indian benchmark indices, the Sensex and Nifty 50, finished Friday’s session with negligible moves after the Reserve Bank of India (RBI) decided to keep the repo rate at 6.5% for the seventh consecutive policy meeting. This decision represented the continuation of stability in the local equities market, which gained for the third week in a row, owing mostly to the performance of financial sector companies.
The first rate cut may happen only in October, provided that headline inflation evolves in line with the forecast. The quantum of rate cut is likely to be limited to about 50 bps during FY2024-25.
Vikram Kasat, Head – Advisory at Prabhudas Lilladher
With a significant moderation in the interbank liquidity surplus over the last fiscal year, the RBI will also continue to manage liquidity more actively through this fiscal year, in line with the policy stance. On the inflation front, the MPC voiced caution about climate shocks domestically and globally, which could instigate food price rises.
Likewise, the prevalent geopolitical tensions may disrupt global supply chains, leading to commodity price spikes, especially in crude oil. Given the same, we believe the MPC may defer the interest rate cut action until Oct ’24.
