Sensex, Nifty Gain as RBI Holds Rates, Crude Oil Dips

Indian equity benchmarks ended Thursday's session on a firm footing, with the Sensex and Nifty both closing higher after the Reserve Bank of India (RBI) kept key interest rates unchanged. A dip in global crude oil prices added to the positive mood on Dalal Street.

RBI holds rates; stance remains accommodative

The central bank's monetary policy committee (MPC) voted to hold the repo rate at its current level, citing the need to support economic growth while keeping inflation within the target band. The decision was widely anticipated by analysts, but markets took comfort from the accompanying commentary, which signaled a continued focus on reviving demand.

Governor Shaktikanta Das, in his statement, reiterated the central bank's commitment to ensuring orderly market conditions and adequate liquidity. He noted that while food inflation remains a concern, the overall trajectory is expected to ease in the coming months, helped by a favourable monsoon and supply-side measures.

Crude oil slip boosts sentiment

Brent crude futures traded lower during the session, extending recent declines as concerns over global demand outweighed supply tightness. A drop in oil prices is a positive for India, a major importer, as it helps contain imported inflation and improves the fiscal and current account outlook.

Lower crude prices also ease pressure on input costs for several sectors, including paints, tyres, and aviation, which had been grappling with elevated raw material expenses over the past year. Analysts said the combination of steady rates and cheaper oil bodes well for corporate margins in the near term.

IT, banking stocks lead the rally

The Nifty IT index rose over a percent, with heavyweights like Infosys, TCS, and HCL Technologies contributing to the gains. The sector has been volatile amid global tech spending concerns, but a weaker rupee and renewed buying from institutional investors provided support.

Banking stocks also traded higher, with HDFC Bank, ICICI Bank, and State Bank of India among the top gainers on the Sensex. Traders said the RBI's steady rates, along with expectations of stable deposit and lending trends, lifted sentiment for financials. The broader market, represented by the BSE Midcap and Smallcap indices, also saw gains, though they lagged the benchmark indices.

Broader market and global cues

Asian peers mostly ended higher, while European markets opened in the green, tracking a positive overnight session on Wall Street. Foreign institutional investors (FIIs) remained net buyers in the cash market, adding to the domestic inflows from mutual funds.

Market participants noted that the RBI's decision, coupled with a relatively stable global environment, has reduced near-term uncertainty. However, they caution that the path ahead depends heavily on the US Federal Reserve's next move and the trajectory of domestic inflation.

Key levels and outlook

The Sensex closed at a fresh record high, while the Nifty ended above the 25,000 mark for the first time. Technical analysts see immediate support for the Nifty at 24,800, with resistance at 25,300. A sustained close above the current levels could open the door for further upside, they say.

Going forward, investors will watch for the release of monthly industrial production and inflation data, due later this month. A softer-than-expected CPI print could reinforce expectations of a rate cut in the October policy review, which would be another trigger for the markets.