Sensex and Nifty decline after RBI says inflation fight not over

Indian shares reversed course to trade lower on Wednesday after the country’s central bank hiked the key interest rate as expected, while signalling continued efforts to bring inflation down.

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) raised the key policy repo rate by 35 basis points (bps), in line with economists’ expectations, after three back-to-back 50-bps moves to tame stubbornly high inflation

RBI Governor Shaktikanta Das said, adding that domestic growth remained resilient in the international environment.Inflation in Asia’s third-largest economy continues to stay above its 2%-6% tolerance band, including in October when it hit a three-month low of 6.77%.

With inflation expected to remain above 6% till Feb-2023 and amid elevated and sticky core inflation prints, we anticipate the MPC hiking the policy rate by another 25-35 bps in February 2023, said Garima Kapoor, economist of institutional equities at Elara Capital.

In domestic trading, Nifty’s FMCG rose as much as 1.02% after comments from the central bank that rural demand was recovering and overall consumer confidence has further improved.