Indian stock indices began the week on a positive note, extending gains from the previous week as investors await the outcome of the Reserve Bank of India’s upcoming monetary policy review meeting. The benchmark indices Sensex and Nifty were trading in a 0.4-0.5% range upon writing this report. The central bank is expected to keep the repo rate unchanged, given the consistent decline in inflation, which is currently at an 18-month low. The potential for further decline in inflation may prompt the bank to pause the rate again.
The monetary policy committee, headed by RBI governor Shaktikanta Das, will hold a three-day-long meeting with a decision to be announced on June 8. In its April meeting, the bank paused the repo rate, and SBI Research expects the bank to again pause repo rate in the June policy meet. We believe at 6.50%, we are in for a prolonged pause, the research unit said. Bear in mind that the RBI raised the repo rate by 250 basis points cumulatively to 6.5% since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
