Indian equity markets began Friday's trading session on a cautious note, with benchmark indices showing minimal movement as investors held their breath for the Reserve Bank of India's (RBI) monetary policy announcement. The market's muted opening reflected the prevailing uncertainty ahead of the central bank's crucial decision.
Market Snapshot: A Flat Start with Underlying Tensions
At the opening bell, the Nifty50 index was positioned just above the 26,000 mark, while the BSE Sensex hovered near 85,250. By 9:18 AM, the Nifty50 was trading at 26,037.90, registering a marginal gain of 4 points or 0.016%. On the other hand, the BSE Sensex was at 85,243.19, down 22 points or 0.026%. This flat opening followed a slight uptick on Thursday, which had broken a four-day losing streak, though gains were capped by persistent foreign fund outflows and the rupee's recent weakness.
Expert View: All Eyes on the RBI Governor
Market sentiment is squarely focused on the RBI's policy direction. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the complexity of the decision. "More important than the rate action, which is very tricky in the context of low inflation, high growth and depreciating rupee, the market will be keen to know what the governor says about the emerging macro trends," he stated.
Dr. Vijayakumar outlined two potential scenarios. A rate cut, which he believes would be the last in the current cycle, could negatively impact banking stocks by squeezing Net Interest Margins (NIMs) and affecting deposit mobilization. Conversely, it would benefit rate-sensitive sectors like automobiles and real estate. If the RBI holds rates steady, banking stocks could see a rally.
He also pointed to the rupee's sharp recovery on Thursday, rebounding to 89.97 from a low of 90.42, as a signal of potential stability. "The RBI governor’s views on the rupee today will significantly influence the near-term direction of the currency," he added.
Global Cues and Fund Flows
Global markets provided a mixed backdrop. US stock indices ended largely flat on Thursday as investors parsed labour market data and other economic indicators, with sentiment supported by expectations of a Federal Reserve rate cut next week. In Asia, shares traded lower in early Friday deals, influenced by a subdued US session that weighed on technology shares and bonds. Attention now turns to key US inflation data due later in the day.
In commodities, WTI crude oil prices were on track for weekly gains of nearly 2%, supported by anticipated Fed rate cuts, escalating US-Venezuela tensions, and stalled peace talks. Gold prices held steady as rising US Treasury yields offset the benefits of a softer dollar.
The domestic institutional flow picture showed a stark contrast. Foreign Portfolio Investors (FPIs) were net sellers to the tune of Rs 1,944 crore on Thursday. However, Domestic Institutional Investors (DIIs) provided strong counter support, making net purchases of Rs 3,661 crore.
As the trading day progresses, the RBI's policy stance and commentary will be the primary driver for market direction, determining whether the indices break out of their anticipated sideways movement or resume a clearer trend.
