Sensex holds gains, Nifty flat after RBI keeps repo rate at 5.25%

Indian equity benchmarks gave a mixed reaction on Wednesday after the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25%, as widely expected. The Sensex managed to hold on to its gains, while the Nifty traded flat, reflecting a cautious market that had already priced in the status quo.

The RBI's Monetary Policy Committee (MPC) concluded its August meeting with no change in the key lending rate, a decision that comes against a backdrop of geopolitical tensions and lingering inflation concerns. Governor Sanjay Malhotra announced the decision, confirming that borrowers will see no immediate impact on their equated monthly instalments.

Rate pause driven by inflation and global risks

The central bank's decision to hold rates steady was largely anticipated by economists and market participants. Inflation, though moderating, remains a key worry for policymakers, especially with the ongoing US-Iran conflict adding uncertainty to global supply chains and energy prices.

Telegraph India had reported ahead of the meeting that the RBI was set to keep rates unchanged as inflation concerns tempered hopes of another cut. That projection proved accurate, as the MPC opted for caution over stimulus.

Market reaction: Sensex firm, Nifty rangebound

In early trade, the Sensex rose while the Nifty showed little movement, according to Reuters. The muted response suggests investors had largely positioned for the rate pause, with attention now shifting to the RBI's commentary on future policy direction.

Telangana Today noted that both indices had climbed in early trading as crude oil prices eased ahead of the RBI policy announcement. A dip in oil prices offers some relief to India's import-dependent economy, though the relief may be temporary if geopolitical tensions escalate further.

No EMI relief for borrowers

With the repo rate unchanged at 5.25%, home, auto, and personal loan EMIs will remain at current levels. The RBI's stance signals that it is prioritising inflation control over supporting growth through cheaper credit.

For the common borrower, this means no immediate change in monthly outflows. However, if inflation cools further in coming months, analysts expect the central bank may reconsider its stance in the next policy review.

What to watch next

Markets will now closely monitor the RBI governor's post-policy press conference for cues on the future rate trajectory. The central bank's commentary on inflation forecasts and its assessment of the US-Iran war's impact on the Indian economy will shape expectations for the next MPC meeting.

Crude oil prices remain a key variable. Any sustained easing could open the door for a rate cut later this year, while a sharp spike would force the RBI to stay on hold for longer.