Sensex, Nifty Erase Early Gains as RBI Maintains Status Quo on Repo Rate

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Mumbai: The Indian equity markets pared early gains on December 4, 2024, after the Reserve Bank of India (RBI) announced its decision to keep the repo rate unchanged at 6.50% in its bi-monthly monetary policy review. The move, which was widely anticipated by market participants, dampened investor sentiment as concerns over inflation and economic growth persisted.




The BSE Sensex, which had opened in positive territory, slipped into the red, dropping over 150 points by mid-session. Similarly, the NSE Nifty fell below the key 19,900 mark, led by selling pressure in banking, financial, and IT stocks.

RBI Decision and Market Reaction

The RBI’s Monetary Policy Committee (MPC) unanimously voted to maintain the status quo on the repo rate, citing a cautious approach to managing inflation risks while supporting economic recovery. The central bank also retained its "withdrawal of accommodation" stance, indicating vigilance over inflationary pressures.

Market analysts noted that the RBI’s decision aligns with global central banks’ cautious approach amidst geopolitical uncertainties and fluctuating crude oil prices. However, the lack of fresh triggers in the policy statement left investors wary.

Sectoral Performance

The banking and financial services sectors were the hardest hit, with the Nifty Bank index shedding over 0.5%. IT stocks also witnessed profit-booking after a strong run in previous sessions. On the other hand, auto and FMCG stocks showed resilience, limiting broader market losses.

Key Takeaways for Investors

  • The RBI’s decision to keep rates unchanged was largely priced in, but the lack of guidance on future rate cuts kept markets subdued.
  • Investors are now shifting focus to upcoming domestic economic data, including inflation and industrial production figures, for cues.
  • Global factors, such as the movement of the US Federal Reserve, will also play a significant role in influencing market trends.

Broader Market Outlook

Despite the mid-session dip, analysts remain optimistic about long-term market prospects, driven by robust domestic consumption and structural reforms. However, short-term volatility is expected as markets digest the RBI’s policy stance and track global developments.

Investors are advised to remain cautious and adopt a stock-specific approach amidst the prevailing uncertainty.

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