Domestic equities took a sharp knock with the benchmark S&P BSE Sensex falling over 450 points
Domestic equities took a sharp knock with the benchmark S&P BSE Sensex falling over 400 points to 65,566 levels. The Nifty50, on the other hand, tested the 19,500-mark.
Read More: TVS Supply Chain Solutions IPO opens for subscription today, GMP gains 11%; should you subscribe?
The drop came after the Reserve Bank of India (RBI) directed banks to maintain incremental cash reserve ratio (ICRR) at 10 per cent, August 12 onwards, in order to reduce liquidity from the system.
Besides, it increased FY24 inflation forecast to 5.4 per cent from 5.1 per cent, discounting near-term risks. Meanwhile, the Monetary Policy Committee kept the policy repo rate unchanged at 6.5 per cent, extending its pause into third straight policy.
Rate-sensitive sectors like banks, automobiles, and real estate erased gains with their indices falling up to 0.7 per cent.
While the domestic economy continues to grow at a reasonable pace and constitutes 15% of the global growth, the MPC has decided to remain watchful of the economic situation, Governor Shaktikanta Das said.
Taking note of the recent surge in vegetable prices, particularly tomatoes, and the firming up of prices globally, the RBI increased its consumer price index-based inflation projection for 2023-24 (April-March) to 5.4% from 5.1%.
The CPI for July is estimated to move back above the upper end of the 2-6% tolerance band to 6.2%, Das said.
Read More: Pyramid Technoplast IPO to open on August 18, price band set at Rs 151-166/share
“A substantial increase in headline inflation would occur in the near term… Uncertainties remain on the domestic food price outlook,” the Governor said.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “The MPC has delivered in line with market expectations on rates, stance and tone, with retention of rates and stance and the tone turning hawkish. The significant change is the upward revision in FY24 CPI inflation projection from 5.1% to 5.4%. This means the high policy rates will remain high for long and, therefore, a rate cut can be expected only in Q1 FY25. From the market perspective, there are no positive or negative surprises in the policy.”
Global Cues
Asian stocks lost ground on Thursday, still hurting from China’s slip into deflation, with investors particularly cautious ahead of a crucial U.S. inflation report that will likely influence the Federal Reserve’s monetary policy path.
Tokyo stocks opened lower Thursday following further falls on Wall Street on the back of weak Chinese data and ahead of a key US inflation report.The benchmark Nikkei 225 index was down 0.33 percent, or 106.39 points, at 32,097.94 in early trade, while the broader Topix index trimmed 0.16 percent, or 3.63 points, to 2,278.94.
Read More: Sebi halves IPO listing time from T+6 to T+3 to benefit investors, issuers
US stocks closed lower on Wednesday, the day after a report showed Americans borrowed more than ever on their credit cards in the last quarter, and a day ahead of U.S. Consumer Price Index (CPI) inflation data that could influence Federal Reserve interest rate decisions.
