Indian stocks climbs modestly; focus remains on Thursday’s RBI policy outcome

On Wednesday morning, Indian stock indices moved moderately higher, but investors’ attention remained focused on the Reserve Bank of India’s (RBI) decision at the upcoming bi-monthly monetary policy review. Benchmark Sensex and Nifty traded 0.3 per cent higher each at the time of writing this report. Investors are waiting for the policy outcome of the meeting, headed by RBI governor Shaktikanta Das, to be announced Thursday morning. A majority of analysts expect the RBI will continue to keep the repo rate unchanged at 6.5 per cent.
A consistent decline in inflation (currently at an 18-month low) and its potential for further decline may prompt the central bank to put the brake on the rate again. RBI’s consistent monetary policy tightening since mid-2022 could be attributed to the substantial decline in inflation numbers in the country.
The RBI in its April meeting paused the repo rate.
Barring the April pause, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. In addition to slowing interest rates, the RBI may issue a new forecast for growth and inflation in 2023-24, after GDP figures for 2022-23 exceeded expectations.
According to preliminary projections provided recently by the National Statistical Office (NSO), real GDP growth for 2022-23 would be 7.2%, up from the forecast 7%.