RBI policy review: What stock market analysts say as Sensex, Nifty near record highs

While the status quo on the RBI policy rate was on expected lines, the upward revision in GDP for FY25 has boosted stock market, as the BSE Sensex added to its morning gains, coming closer to its record high levels. The RBI maintained the policy stance of "withdrawal of accommodation" with a 4:2 majority, which is lower compared to the previous meeting, which had a majority of 5:1.

"This suggests that the RBI may be preparing the market for a change in stance in the upcoming meeting. On a positive note, the RBI upgraded the GDP forecast to 7.2 per cent from an earlier projection of 7 per cent, indicating solid prospects for the domestic economy in the future," said Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS.

The BSE Sensex climbed 1,413.89 points or 1.88 per cent to 76,475.51 and was close to its record high of 76,738.89 hit on June 3. Nifty stood at 23,217.05, up 395.65 points or 1.73 per cent.

"“The RBI is playing the role of a perfect conductor. Music is flowing through in a melodious tone. Core Inflation is below mid-point of target, Inflation trajectory is falling, growth is in the higher range, rupee is stable and liquidity is well balanced albeit with some skewness due to government spending. Market just want the show to go on which the credit policy has delivered. Why repair something which ain't broken?,” said Nilesh Shah, Managing Director, Kotak Mahindra AMC. 

With major global central banks like ECB and BoC cutting interest rates, it was expected that RBI would change its stance at the June policy meeting, before deciding on the interest rate cuts later this year. But the RBI amply stated that although it monitors the global interest rate trajectory, it does not blindly follow it, with India’s monetary policy rates primarily driven by domestic conditions. 

"On the interest rate policy trajectory, notwithstanding RBI’s reiteration of not following the Fed, we think that the central bank will likely act on the interest rates, once the Fed starts delivering the rate cuts. We think RBI will act on the interest rates in October, following a likely rate cut by the Fed in September," said Amar Ambani,  Executive Director at 
YES Securities.

Dhawal Dalal, President & CIO-Fixed Income at Edelweiss MF said the RBI MPC held policy rate was steady for the fifth 5th  but the voting changed to 4-2 with two MPC members voting for a rate cut. 

"The RBI upgraded FY25 GDP growth to 7.2 per cent from 7 per cent, which is positive. However, the RBI was concerned with sticky food inflation amid uptrend in global food prices and industrial commodity prices. Overall, a prudent monetary policy in our view with potential rate cuts pushed in the 3rd quarter of FY25," he said.