Indian shares inch lower after RBI pause; log weekly losses on crude surge, outflows
- RBI raises its inflation projection for the ongoing financial year to 5.1% from 4.6% and trims its GDP growth forecast to 6.6% from 6.9%
Indian shares were muted on Friday after the Reserve Bank of India’s widely expected rate pause, as investors assessed the central bank’s measures to support the rupee against concerns of higher inflation and a lower growth forecast.
The RBI raised its inflation projection for the ongoing financial year to 5.1% from 4.6% and trimmed its GDP growth forecast to 6.6% from 6.9%.
The revisions reflect increasing pressures on the economy from the Iran war-led energy crisis and the projection of a weak monsoon.
The benchmark Nifty 50 fell 0.21% to 23,366.70, while the BSE Sensex shed 0.16% to 74,243.34.
Both indexes had risen about 0.3% soon after the rate decision, but surrendered those gains as investors assessed the RBI’s cautious outlook.
“For investors, the message is simple: don’t expect rate cuts to do the heavy lifting from here. Markets will now need earnings growth to justify valuations, not cheaper money,” said Rishabh Nahar, partner and fund manager at Qode Advisors.
The rupee rose the most in a session in two months against the dollar, while the 10-year bond yield fell after the RBI announced measures to attract foreign inflows.
India ramps up defence of faltering rupee after holding fire on rates
The government also exempted foreign investors from capital gains tax on interest from government securities in a bid to ease pressure on the rupee.
Analysts said a stable currency could help improve foreign investor sentiment after record outflows from Indian equities this year.
Ten of 16 major sectors advanced on Friday. The broader small-caps settled flat and mid-caps fell 0.4%.
Banks and state-owned lenders gained 0.4% and 0.5%, respectively, as the rate pause eased worries about higher borrowing costs, supporting the outlook for credit growth, analysts said.
The Nifty and Sensex fell about 0.8% and 0.7% this week, taking their year-to-date losses to 10.6% and 12.9%, weighed down by foreign outflows due to elevated oil prices, limited AI exposure and moderating earnings.
Fast-moving consumer goods fell 2.2% this week and were the top sectoral losers after India forecast an El Nino-weakened monsoon in 2026.
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