RBI ignores ‘Global Dangal’ in MPC meet. What does it mean for stock market investors?

Despite recent headline-grabbing events in global markets and dovish guidance from other central bankers, the RBI MPC decided on Thursday to keep policy rates and stance unchanged. Since this decision aligned with market expectations, it had a largely neutral impact on stock investors.

“Global ‘dangal’ to continue. The RBI does not seem to be under any duress to act just because of global developments,” said Lakshmi Iyer, CEO – Investments & Strategy, Kotak Alternate Asset Managers.

Sensex and Nifty were trading flat, while Nifty Bank went up 274 points with heavyweights HDFC Bank and SBI leading the upside. The markets have been highly volatile in the last few days amid recession-related worries in the USA and the unwinding of Japanese yen carry trade.

Statements from central banks have gained heightened importance following Japan’s interest rate hike, with significant attention on the Federal Reserve’s potential acceleration of rate cuts in the United States.

“Considering the global context, along with the higher base effect and a favorable monsoon conditions, it would have been prudent for the RBI to cut interest rates in the latest monetary policy,” Sunil Damnia, CIO, MojoPMS, said.Kotak Mahindra Bank expects a change in stance in the October policy, with rate cuts starting in December. Nomura predicts the RBI is on the brink of a policy shift, with a potential easing cycle beginning in October and a 25 bps rate cut.”On the backdrop of stable growth and volatile food prices, we expect the RBI to take a call on rate cuts only if it feels more confident in reaching a 4–4.5% inflation trajectory. Market interest rates have dropped over the past months due to strong demand and a fall in global rates. We expect the 10-year benchmark G-Sec to gradually soften towards the 6.5%–6.75% range over the next 6–9 months,” said Sachin Bajaj, EVP and Chief Investment Officer at Max Life Insurance.Analysts say one needs to watch out for Fed action in September when a rate cut is near certain which will set the stage for RBI.

“Given the current momentum in high-frequency indicators, there is optimism for upward revisions to GDP forecasts, going forward. With more clarity on FY26 inflation and GDP growth trajectory going ahead, we expect the RBI to initiate a dovish stance from Q3FY25 and a probable rate cut in Q4FY25, said Manish Chowdhury of Stoxbox.

The market will now turn its attention back to global cues.
Although there are signs of a temporary bottom in the global market, Nifty and Nifty Bank are still a risk of fresh selling pressure at higher levels.

“Technically, Nifty is forming a bottom around the 50-DMA of 24,000, with important hurdles at 24,350, 24,525, and 24,700. Meanwhile, Nifty Bank is trying to establish a base around the 100-DMA of 5,000, with the key resistance area between 51,000 and 51,500,” Santosh Meena, Head of Research, Swastika Investmart.