On Friday, the Indian stock market traded almost flat after the Reserve Bank of India (RBI) announced a 25 basis points (bps) cut in the repo rate.
The BSE Sensex was trading down by 112 points or 0.14 percent at 77,945, while the Nifty was at 23,585 with 18.30 points or 0.08 percent lower during the intra-day trade.
Metal stocks gained, but declines in ITC Ltd, Reliance Industries Ltd, and some banking and financial stocks offset the gains, causing both indices to show little movement.
Nifty Metal rose more than 2 percent after the RBI Governor stated that manufacturing activity in the country is at its peak.
The Monetary Policy Committee (MPC), led by the new RBI Governor Sanjay Malhotra, cut rates for the first time since May 2020 and kept the policy stance ‘neutral.’
“The MPC noted that inflation has declined. Sanjay Malhotra, RBI Governor, said that a favorable outlook on food and the continuing transmission of past monetary policy actions will support further moderation in 2025-26, gradually aligning with the target.
The RBI has also forecasted India’s GDP growth rate to be 6.7 percent for the financial year 2025-26.
It expects the economy to grow at 6.7 percent in the first quarter, 7 percent in the second quarter, and 6.5 percent in the third and fourth quarters.
The central bank noted that it balances the risks to growth evenly.
According to a report by Nomura, a 5 percent depreciation in the rupee could push up Consumer Price Index (CPI) inflation by 0.26 percentage points, core inflation by 0.10 percentage points, and GDP growth by 0.20 percentage points.
“However, due to weak global demand and slow domestic consumption, the impact of currency fluctuations on inflation and exports may be limited this time,” the report added.
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