Indian equity markets ended flat in today’s session, December 6, with the Nifty 50 and Sensex showing little movement after a series of key announcements by the Reserve Bank of India (RBI), which maintained the repo rate at 6.5% for the eleventh consecutive policy meeting.
The central bank’s decision to reduce the Cash Reserve Ratio (CRR) by 50 basis points in its MPC meeting today had little impact on market sentiment as the move was largely anticipated by investors.
While the CRR cut was seen as a positive measure to support liquidity in the banking system, the markets remained subdued due to concerns over India’s economic outlook and inflation. A revision of the FY25 GDP growth forecast from 7.2% to 6.6% and an upward adjustment in the inflation target from 4.5% to 4.8% weighed on investor confidence.
The dual challenges of rising inflation and slowing growth are now coming to the forefront, raising questions about the sustainability of economic recovery.
The persistent inflation is affecting economic growth and eroding the purchasing power of consumers, particularly those in urban India. The central bank expects inflation to remain elevated in the current quarter, with a potential deceleration only in the fourth quarter of the fiscal year, driven by seasonal corrections in vegetable prices.
Additionally, the RBI highlighted the potential impact of protectionism, which it believes could contribute to a rise in prices and elevate global inflation.
On the back of the CRR cut and concerns over economic growth and inflation, the Nifty 50 ended the session with a minor loss of 11 points at 24,682 but posted a sharp weekly gain of 2.30%. Meanwhile, the Sensex closed with a slight drop of 0.11% at 81,671, wrapping up the week with a notable uptick of 2.33%.
While the front-line indices struggled to find momentum, mid- and small-cap stocks continued their strong performance, extending their bull run for the sixth consecutive session. The Nifty Midcap 100 index gained 0.47% to close at 58,720, finishing the week with a solid gain of 4.13%.
Similarly, the Nifty Smallcap 100 index extended its winning streak for the 11th consecutive session, adding 0.87% to reach 19,501, and concluded the week with a robust gain of 4.61%.