Equity indices edge up ahead of RBI rate decision

Equity benchmark indices opened higher on Friday ahead of an interest rate decision by the country’s central bank, which has stuck to a loose monetary policy to support a post-pandemic economic recovery but is now faced with rising inflation.

The NSE Nifty 50 index was up 0.36 per cent at 17,701, while the S&P BSE Sensex rose 0.3 per cent to 59,212.42.

Even though inflation has breached the 6 per cent upper limit of the central bank’s target range for two months, a Reuters poll showed it will still wait at least a few more months before joining other central banks in raising rates.

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The Reserve Bank of India has for nearly two years kept the key repo rate at a record low of 4% and kept its stance accomodative until the economic recovery is firmly entrenched.

In support of this view, Governor Shaktikanta Das had last month said inflation was expected moderate despite a surge in global prices for crude oil.

“While, it is true that there are countries that are deviating from the US Federal Reserve’s hawkish rhetoric … India perhaps has some space to keep rates unchanged for now, but a prolonged deviation could be destabilising,” HDFC Bank’s Treasury Research team said in a preview note.

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