Why stock market, Sensex, Nifty fell after RBI policy: RBI governor Shaktikanta Das emphasised on food inflation and said food prices have remained elevated for too long

According to the Reserve Bank of India governor, during 2024-25 (up to August 7), the Indian rupee (INR) remained largely range-bound. The lower volatility of the INR bears testimony to Indias macroeconomic and financial stability, and an improving external sector outlook. In the last few days, global financial markets have seen turmoil on concerns of growth slowdown in a major economy, flare up in geopolitical tensions in the Middle East and the unwinding of the carry trade. These developments have implications for emerging market economies. In this context, it would be important for market participants to keep in mind the strength of Indias macroeconomic fundamentals, which remain robust. India has built strong buffers that impart resilience to the domestic economy from such global spillovers. The Reserve Bank remains committed to ensure orderly evolution of financial markets in its regulatory domain.

Shares of Bank of Baroda, Union Bank of India and Indian Bank can potentially rally up to 15% if these support levels are held; check key support and resistance levels for 5 PSU bank stocks here.

Global economic outlook exhibits steady though uneven expansion, the RBI governor stated while keeping benchmark policy rates unchanged for the eighth consecutive review since February 2023. Manufacturing is indicating slowdown, while services activity is holding up. Notwithstanding sticky services prices, inflation is receding grudgingly across major economies. With varying outlook for growth and inflation across countries, monetary policy is showing signs of divergence across jurisdictions. Several central banks are cautiously moving towards policy pivots through forward guidance and rate cuts; at the same time, there has been tightening by a few central banks. Global financial markets are exhibiting volatility. Bond yields and the dollar index have softened since the last meeting.