Indian stock market falls after RBI decision.
Among the IT stocks, Coforge emerged as the biggest loser of the day, witnessing a sharp decline of 3.49 per cent. The stock faced selling pressure amid broader market weakness and negative sentiment following the RBI’s policy announcements.
RBI Keeps Repo Rate Unchanged: Indian Stock Market Reacts Cautiously
Mumbai, August 7: The Indian stock market continued its cautious trajectory on Wednesday, extending losses after the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) announced its decision to maintain the repo rate at 5.5 per cent. Although largely expected, the decision, coupled with broader global uncertainties, impacted investor sentiment, pulling down benchmark indices in early trade.
As of 10:54 am, the NSE Nifty 50 slipped below its crucial resistance level of 24,600 and was trading at 24,569, reflecting an intraday loss of 0.33 per cent. Markets had already opened slightly lower ahead of the policy announcement, with Nifty down 0.08 per cent and Sensex shedding 0.07 per cent in early morning trade.
In line with market expectations, the central bank chose to hold the repo rate steady and retained its “neutral” monetary policy stance. According to RBI Governor Shaktikanta Das, the central bank believes this stance remains appropriate to ensure that inflation continues on a downward path while also supporting economic growth.
While a status quo on rates was widely anticipated, the market’s subdued reaction indicated a growing sense of caution among investors. Analysts say that the market is now closely watching external triggers, particularly global geopolitical tensions and economic signals from the United States.
According to financial experts, another significant factor affecting sentiment was the recent announcement by US President Donald Trump regarding steep tariffs, which has injected a fresh layer of uncertainty into global trade and financial markets. With global growth already facing multiple headwinds, this unexpected tariff development may further dampen risk appetite across emerging markets, including India.
It attributed this projection to strong rural demand—thanks to a favorable monsoon season—and increased government spending, especially on large-scale infrastructure initiatives. These factors, it believes, will support the momentum of domestic consumption and capital formation, even amid global uncertainties.
RBI also revised its outlook on inflation positively. It pegged the Consumer Price Index (CPI) inflation for 2025-26 at 3.1 per cent. This relatively low figure is backed by expectations of stable food prices as a result of robust kharif sowing and consistent monsoon progress. Lower inflation could give the central bank more flexibility in future rate decisions, although policymakers are likely to remain vigilant in the face of unpredictable external pressures such as oil prices and global commodity trends.
Despite this stable macroeconomic outlook, the reaction in equity markets remained lukewarm. Sectors like banking, real estate, and IT bore the brunt of the intraday correction. Notably, among the IT stocks, Coforge stood out as the biggest loser, dropping 3.49 per cent. Other IT majors like Infosys and HCL Tech also traded in the red as investor interest waned amidst weak global cues.
“While the RBI’s stance wasn’t surprising, markets are now pricing in global risks more actively,” said Arvind Mehta, senior research analyst at an investment advisory firm. “The neutral stance suggests the RBI wants to maintain flexibility going forward, but for the markets, the broader story now involves both domestic policy stability and external volatility, especially from the US.”
He further added that the stability in rates and inflation targets is a positive sign for long-term investors, but in the short term, markets are likely to remain range-bound until more clarity emerges from the global front.
On the currency front, the Indian rupee remained stable, trading within a narrow band against the US dollar. Bond markets also held steady, with the yield on the 10-year government bond hovering around 7.12 per cent, reflecting confidence in the RBI’s inflation and growth projections.
Overall, Wednesday’s market reaction highlights the delicate balancing act that lies ahead for Indian policymakers and investors alike. While the RBI has kept its policy tools steady and painted a broadly stable economic outlook, the immediate concerns lie beyond domestic borders. Until the global environment offers more certainty, market participants are likely to tread with caution.
In the days ahead, investors will closely monitor US tariff developments, crude oil prices, and upcoming inflation data to gauge future market direction.