RBI Rate Hike Ends Nifty’s 2 Day Rally; Metal Index Falls Over 2% and Closes Below 200 DMA

Indian benchmark indices gave up their two-session winning streak on Wednesday as investors digested the Reserve Bank of India’s (RBI) latest monetary policy decision, persistent crude oil risks and weakness across global markets.

RBI Rate Hike by 25 bps

The RBI increased the policy repo rate by 25 bps to 5.50%, marking its first rate hike since early 2023. The central bank also changed its policy stance to calibrated tightening, with inflation risks from elevated energy prices and tighter global financial conditions remaining in focus.

Nifty Slips Snaps 2-Day Rally 

The Nifty 50 opened at 22,690.45 and moved to an intraday high of 22,717.65 in early trade. Selling pressure soon emerged, pushing the index down to 22,546.30.

Several recovery attempts during the day struggled around the 22,650 to 22,700 zone. Buying from lower levels helped the index regain the 22,600 mark towards the close, but it still ended firmly in negative territory.

The Nifty 50 settled at 22,603.05, down 173.05 points or 0.76%, snapping its two-day rally. The Sensex fell 429.10 points or 0.59% to 72,638.71.

Banking shares showed relative resilience, with the Bank Nifty slipping only 0.13%. Meanwhile, India VIX rose nearly 2.06% to around 13.9. 

Sectoral Performance: Nifty Metal Close Below 200-DMA, PSU Banks Buck the Trend

Sectoral performance remained largely negative, with only two of the 11 major sectoral indices managing to close higher.
The Nifty PSU Bank index gained around 1%, reversing part of the previous session’s decline. Bank of Maharashtra advanced more than 4% during the session.

At the other end, the Nifty Metal index dropped 2.33%, emerging as the worst-performing major sector. Furthermore, the index closed below the important long-term moving average of 200-DMA. All constituents of the index ended in the red.

Nifty Smallcap Ended in Green

In the broader market, the Nifty Midcap 100 declined 0.63%, while the Nifty Smallcap 100 gained 0.30%, resulting in a mixed performance outside the large-cap space.

Rupee Nears Lifetime Low Despite RBI Action

The Indian rupee weakened to 96.8450 against the US dollar, approaching its record low of 96.96, even after the RBI’s 25 bps rate increase.

The currency remained under pressure amid a firm dollar, elevated global bond yields and weak risk appetite across financial markets.

During the post-policy interaction, RBI Governor Sanjay Malhotra said financial markets can behave irrationally in the short term but generally correct over time. The comments indicated the central bank’s focus remains on maintaining orderly market conditions rather than defending a specific rupee level.

Brent Crude Stays Above $101

Brent crude traded above $101 per barrel as geopolitical risks in the Middle East continued to support prices.

Concerns around tanker movements through the Strait of Hormuz remained elevated following fresh attacks, while regional tensions also increased after a Saudi-led coalition intercepted a Houthi missile.

At the same time, signs of improving oil flows kept crude prices lower on a weekly basis. Saudi Arabia’s East-West pipeline restored pumping capacity to around 5.8 mn barrels per day, while tanker movement through the Gulf showed gradual improvement.

In the US, industry data indicated crude inventories declined by 2.1 mn barrels in the previous week.

European Markets Remain Under Pressure

European equities were trading lower during the session.

Germany’s DAX fell 1.21% to 25,142.48, while the FTSE 100 declined 0.57% to 10,481.19. France’s CAC 40 slipped 0.95% to 7,790.26.

The broad decline across major European markets reflected cautious global risk sentiment.

US Futures Point to Weak Wall Street Start

US equity futures were also trading lower ahead of the Wall Street opening.

Dow Jones futures fell 199 points or 0.38% to 51,617, while S&P 500 futures declined 0.17% to 7,860.50.

Technology-heavy Nasdaq 100 futures dropped 0.46% to 31,338, showing greater weakness compared with the other major US index futures.