The Indian stock market started the new week with little activity. Last Friday, it saw a rise of more than 500 points following the central government's Budget announcement, indicating a commitment to fiscal consolidation despite the upcoming General elections.
At the start of trading on Monday, the Sensex stood at 72,022 points, marking a decrease of 63 points or 0.1 per cent, while the Nifty was at 21,850 points, reflecting a decline of 4 points or 0.01 per cent.
On February 1, the Indian stock market experienced significant fluctuations on Budget Day before ultimately ending the day with a slight decline.
Analysts suggested that the underwhelming performance in the stock market could be attributed to lower-than-expected capital expenditure outlined in the Budget and the lack of clear guidance from the US Federal Reserve regarding monetary policy easing. Others, however, believed it could be linked to minor profit-taking.
The Sensex and Nifty, which represent the broader market indices, initially showed gains at the start of trading on February 1. However, as the day went on and the budget was presented, they moved into negative territory.
Throughout the upcoming week, investors will closely monitor the three-day RBI monetary policy meeting commencing on Tuesday. The RBI generally holds six bimonthly meetings each fiscal year to discuss interest rates, money supply, inflation projections, and other macroeconomic factors.
In its December gathering, the RBI unanimously opted to maintain the policy repo rate at 6.5 percent, thus upholding the current state for the fifth consecutive occasion.
The Reserve Bank of India's (RBI) Monetary Policy Committee is anticipated to once more hold off on changing the repo rate during its February review meeting, as per SBI Research. The repo rate represents the interest rate at which the RBI provides loans to other banks.
Excluding the most recent breaks, the RBI has increased the repo rate by a total of 250 basis points to 6.5 percent since May 2022 in its efforts to combat inflation. Raising interest rates is a monetary policy tool that usually serves to curb demand in the economy, thus aiding in the reduction of the inflation rate.
The current inflation rate in India is within the RBI's preferred range of 2-6 per cent, but it surpasses the optimal 4 per cent target. In December, it stood at 5.69 per cent.
