Indian equity markets ended flat in today's session with the Nifty and the Sensex showing little movement after a series of key announcements by the Reserve Bank of India (RBI) in its MPC meeting today, which maintained the repo rate at 6.5% for the eleventh consecutive policy meeting.
The central bank's decision to reduce the Cash Reserve Ratio (CRR) by 50 basis points had little impact on market sentiment as the decisions had largely been anticipated by investors.
While the CRR cut was seen as a positive measure to support liquidity in the banking system, the markets remained subdued due to concerns over India’s economic outlook and inflation. The RBI downgraded its 2024-25 real GDP growth forecast from 7.2% to 6.6% and raised the inflation target from 4.5% to 4.8%, dampening investor sentiment.
The dual challenges of rising inflation and slowing growth are now coming to the forefront, raising questions about the sustainability of economic recovery.
The persistent inflation is affecting economic growth and eroding the purchasing power of consumers, particularly those in urban India. The central bank expects inflation to remain elevated in the ongoing quarter, with a potential deceleration only in the fourth quarter of the current fiscal year.
The RBI highlighted the potential impact of protectionism, which it believes could contribute to a rise in prices and elevate global inflation.
On the back of the CRR cut and concerns over economic growth and persistent inflation, the Nifty ended the session with a minor loss of 0.12% at 24,677, snapping its 5-day winning streak but posting a sharp weekly gain of 2.27%. The Sensex also ended its 5-day bull run, closing the session with a slight drop of 0.07% at 81,709, wrapping up the week with a notable uptick of 2.39%. Notably, this marked the third consecutive week of gains for both indices.
While the frontline indices struggled to find momentum, midcap and smallcap stocks continued their strong performance. The Nifty Midcap 100 index extended its winning run for the sixth consecutive trading session, gaining 0.45% to close at 58,704, finishing the week with a solid gain of 4.10%.
Similarly, the Nifty Smallcap 100 index extended its winning streak for the 11th consecutive session, adding 0.82% to reach 19,492, and concluded the week with a robust gain of 4.511%.
Commenting on today's market performance, Vinod Nair of Geojit Financial Services said, "Though benchmark indices concluded on a flattish trend, Indian broader indices displayed optimism as the RBI acknowledged the downward growth trend while last-mile inflation persisted."
"By lowering the CRR and injecting ₹1.16 lakh crore into the financial system, the RBI aims to stimulate economic growth amid increased liquidity. The overall market exhibited a mixed outlook, reflecting a cautious yet resilient stance, with sector rotation and specific stock movements shaping market sentiment," he added.
(By arrangement with livemint.com)
