Sensex, Nifty slip after RBI maintains status quo; here's what it means for the investors

Domestic benchmark indices Sensex and Nifty on Thursday (August 8) traded lower after the Reserve Bank of India (RBI) governor announced to keep the repo rate unchanged at 6.5 per cent. At the last count, Sensex was down 470.40 points or  0.59 per cent at 78,997.61 and Nifty slipped 124.15 points or 0.51 per cent at 24,173.35. 

In the broader market, Nifty Midcap 100 and Smallcap 100 traded in the positive territory. On the sectoral front, buying was seen in pharma, realty, and healthcare stocks. 

What did RBI governor announce? 

RBI on Thursday decided to keep the policy rate unchanged for the ninth time in a row, saying food inflation remains stubborn.

The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.

Announcing the third bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.

He said MPC will remain watchful of elevated food inflation.

The RBI keeps the growth projection unchanged at 7.2 per cent for the current financial year.

Here's how analysts view the RBI policy decision

"The recent RBI policy announcement was largely uneventful, with the central bank keeping policy rates unchanged and continuing the withdrawal of accommodation as expected," said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Meena added the focus remains on tackling inflation, with no concerns about growth, and there are no indications of rate cuts in the near term. Consequently, the market will now turn its attention back to global cues.

Further, he said, "Although there are signs of a temporary bottom in the global market, Nifty, and Banknifty, there is still a risk of fresh selling pressure at higher levels. Technically, Nifty is forming a bottom around the 50-DMA of 24,000, with important hurdles at 24,350, 24,525, and 24,700. Meanwhile, Nifty Bank is trying to establish a base around the 100-DMA of 5,000, with the key resistance area lying between 51,000 and 51,500."

Echoing a similar view, Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, "The status quo in policy rates and stance were on expected lines. The Governor emphasised the need for vigilance on the inflation front saying “price stability is necessary for sustained growth.”

Dr. V K Vijayakumar added there is nothing in the policy that will influence the market much. The market will be focused on the US jobs data today the market’s response to it and the recession fears in the US.

Moreover, Lakshmi Iyer, CEO - Investments & Strategy, Kotak Alternate Asset Managers Limited said, "Status quo on rates and policy stance was in line with our expectations. The RBI does not seem to be under any duress to act just because of global developments. Markets to be guided by development on the global policy front, domestic inflation, and monsoon progress. Bond yields to continue to find anchor due to FPI buying. We maintain our preference for government bonds over corporate bonds.”

Conversely, Manju Yagnik, Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO-Maharashtra said, "The RBI's commitment to balancing growth and inflation is commendable, and I believe this approach will boost market sentiment and stimulate long-term investment in the housing market."

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