MUMBAI: Indian stock markets rose after the Reserve Bank of India (RBI) hiked policy rates for the third time in a row to contain runaway inflation. Market experts believe that advance loading of rates will support the domestic currency and also help boost FPI inflows.
The central bank’s rate setting panel raised the key policy repo rate – at which the RBI lends to banks – by 50 basis points. The market was widely expecting an increase of 35 basis points.
The benchmark Nifty rose 69 points, or two-fifths of a percentage point, to 17,451, while the Sensex rose half a percentage point to 58,567 after RBI Governor Shatikanta Das’s statement. The Indian rupee rose nearly half a percent to a dollar at 79.08.
Most market experts expect Nifty to trade in the range of 17000-17800. 17750-17800 is an extension of the trend line joining the lower highs of October 2021, January 2022 and April 2022.
After the announcement of the policy, Nilesh Shah, MD & CEO, Kotak AMC said, “Markets will be happy. The hike in repo rate by 50 bps is to ensure that the reduction in inflation comes down to RBI’s upper band of 6% by 4Q FY23.”
India’s retail inflation topped 7% in June and for the sixth consecutive month exceeded the RBI’s upper tolerance limit of 6%.
IIFL Group Chairman Nirmal Jain said front loading will support the rupee and attract FII inflows, which have been positive since July after nine months of selling.
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