Nifty, Sensex dip as RBI maintains interest rates

Mid-day market update: Benchmark indices fell once again into the negative territory after gaining momentum shortly after Reserve Bank of India's decision to keep interest rates unchanged at 6.5 per cent.

As of 1:15 pm, the 3-share BSE Sensex was trading 418.6 points lower at 79,049.34 and the broader Nifty 50 index was trading 139.20 points lower at 24,158.30.

The central bank’s stance, which was anticipated, reflects its ongoing concern over persistently high food inflation.

The RBI has kept interest rates unchanged for the ninth consecutive meeting, with Governor Shaktikanta Das cautioning against complacency despite falling core inflation.

Since February 2023, the RBI has maintained steady interest rates. During this period, the Nifty 50 index has surged approximately 36per cent, driven by robust economic growth, strong corporate earnings, and abundant liquidity. However, the equity benchmarks have experienced intermittent profit-taking as they trade near record highs.

"India’s current economic resilience might have allowed for a slight rate cut to test inflationary waters, but the RBI opted for a safer course," commented Umeshkumar Mehta, Chief Investment Officer at SAMCO Mutual Fund.

Analysts noted that while the RBI's commentary on inflation was slightly more hawkish than expected, the retention of growth and inflation forecasts suggests the economy remains robust.

Indexes linked to financials saw gains, with the financial services index rising by 0.3per cent and the banking index increasing by 0.2per cent.

HDFC Bank, the most heavily weighted stock on the Nifty 50, climbed 1.7per cent after several brokerages highlighted the private lender’s advantage in retail asset quality.

The RBI also cautioned banks about the rapid growth in certain segments of retail loans, advising them to monitor loan quality to avoid systemic risks.

Tata Motors advanced 2.4per cent on optimism that its new car, 'Curvv.ev,' would enhance its market share.

Seven of the 13 major sectors posted losses, with IT, energy, and metals sectors each declining by about 0.6 per cent.

(With Reuters inputs.)