Stock markets are expected to open flat on Friday, as all eyes are on the RBI meeting outcome on rates. The newly appointed Governor, Sanjay Malhotra, is expected to announce the committee’s decision at 10:00 a.m.
Traders seem to have opted for a cautious approach, preferring to book some long positions around this key level ahead of the RBI policy decision and the Delhi state election results, both of which could induce volatility, said Rajesh Bhosale, Technical Analyst, Angel One Ltd.
Dhiraj Relli, MD & CEO of HDFC Securities, said the Reserve Bank of India (RBI) is widely expected to cut the repo rate by 25 basis points at the upcoming Monetary Policy Committee (MPC) meeting, led by Governor Malhotra. However, this decision remains finely balanced. The central bank may instead prioritize liquidity measures and defer the rate cut to the April policy review, particularly in light of mounting global uncertainties.
Gift Nifty at 23,705 indicates a flat opening with upward bias.
“There are several compelling arguments in favor of a rate cut. Sluggish economic growth, the government’s advance estimates, and recent efforts to boost banking system liquidity create a strong case. Just last week, the RBI announced plans to inject ₹1.5 lakh crore into the banking system, following a December infusion of ₹1.16 lakh crore through a 50 basis point reduction in the cash reserve ratio,” he said, adding that
Nonetheless, challenges persist. Inflation remains above the RBI’s medium-term target of 4%, and increasing global trade-related uncertainties have added complexity to the economic outlook. The government’s fiscal prudence, reflected in the recently announced Union Budget, points toward a downward trajectory for interest rates. While the broader direction seems clear, the precise timing of the next rate cut remains uncertain.”
Rupee to remain stable
According to Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, around the current levels, that is, 87.30/40, the Rupee’s depreciation has technically saturated. In other words, the rupee’s depreciation evens out with the level of depreciation in emerging market currencies and Latin American and African currencies.
“The consumption boost in the budget is talked about in relation to the Rs.1 Lakh plus crs that is coming into hands of the taxpayers in the lower tax brackets. This amount will be spent either on consumption or investment. Assuming that the split may be 50/50 ,between C and I, the price impact of this may be quite limited. The effect will also be spread over a period on one year. Therefore, it’s inflation implications will also be limited,” he further said.
“The rate cut with narrow the interest rate differentials between the US and India, and would influence the premium, but in this case the market yields have already moved down in consonance with interest rate expectations which includes even the result of RBI action.
We should not undermine the probability of larger dollar inflows in to India on account of repatriation by companies mainly tech companies who may be having their receivables from overseas business. Therefore, the Rupee will not fall like an apple.,” he added.
Meanwhile, the Bank of England has cut interest rates by another 25 basis points. Global stocks in the Asia-Pacific region are mixed, but equities of large economies such as Japan and China are moderately down.