Indian benchmark indices came under pressure on Wednesday after the Reserve Bank of India increased the policy repo rate by 25 basis points to 5.5%. The move was widely anticipated by the market, but the RBI’s shift towards a ‘calibrated tightening’ stance added to concerns over borrowing costs and liquidity.
The Sensex fell as much as 547 points to 72,520.73, while the Nifty 50 declined 198 points to 22,578.25 during early trading. Both indices later recovered a portion of their losses. The Sensex climbed to an intraday high of 72,969.57, while the Nifty touched 22,701.60 as investors assessed the RBI’s growth and inflation projections.
What Did RBI Announce?
At its October 5-7 meeting, the Monetary Policy Committee unanimously voted to raise the repo rate by 25 basis points from 5.25% to 5.5%. The RBI also increased the Standing Deposit Facility rate to 5.25%, while the Marginal Standing Facility rate and bank rate remained unchanged at 5.75%.
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Alongside the rate decision, the central bank raised its FY27 real GDP growth forecast by 40 basis points to 7.1%. However, its CPI inflation projection for the financial year was also increased to 5.2%.
The combination of stronger growth expectations and higher inflation projections suggests that the RBI is becoming more cautious about price pressures.
Why Are Sensex and Nifty Falling?
The rate hike was not the only factor weighing on Indian equities. Global market developments also contributed to the pressure.
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