The Indian stock market witnessed heavy selling on Thursday after the Reserve Bank of India (RBI) surprised investors by deciding to keep key policy rates unchanged.
The Nifty 50 index fell more than 1% to a low of 21,709 during Thursday’s trading. BSE Sensex also saw a decline, hitting a low of 71,405 and losing nearly 750 points in just one day. Bank Nifty index saw a decline of nearly 600 points and reached a low of 45,227.
Market experts were thinking that RBI will probably ease it and probably also reduce the interest rates soon. But, surprising everyone, the central bank decided to keep rates at 6.5% and remain cautious about inflation. So now people are not so sure whether they will reduce the rates in the next few months or not.
Swastik Investmart boss Sunil Nyati noted that while most people were not surprised by the RBI’s decision to keep rates the same, investors were disappointed by the absence of any sign of a rate cut in the future. The market was expecting a more optimistic outlook which would benefit banking and rate-sensitive stocks.
Nyati believes that there is still a bias towards Nifty and some technical support around the 20-day moving average at 21,670. The index may face some resistance at 22,125, but if it surpasses that, it may move to 22,222 and 22,350 levels.
As for Bank Nifty, it has established a base between 45,500-44,800 and needs to break the 20-day moving average barrier of 46,300 to move towards 46,800-47,000 range.
According to Divam Sharma, founder and fund manager, Green Portfolio, the RBI’s decision to keep things as they are has made some people feel optimistic in the short term. However, this is unlikely to have a major impact in the long run. So, if you are investing in shares, be careful as the market is still unpredictable.
The banking industry will be sensitive to rate changes, which have received a boost over the past year. Anil Rego, who founded and manages Right Horizons, believes that if rates keep falling, banks will eventually earn less money from interest, but that does not seem to be the case in FY24. It looks like credit growth will be positive and will help banks next year.
According to Rego, whenever the RBI eases its monetary policy, NBFCs and credit-dependent industries like automotive and real estate stand to benefit the most.
Overall, much of the selling was caused by the RBI’s unexpected stance, which reminded investors that there are still risks when it comes to inflation and interest rates.
The cautious tone has also made people doubt whether there will be a smooth recovery in the Indian economy. The market will probably remain unpredictable for some time, as everyone waits for macro data and global signals to see what happens next.