Indian benchmark indices opened sharply lower on Wednesday, with the Sensex falling 460 points and the Nifty declining nearly 165 points as investors turned cautious ahead of the Reserve Bank of India’s monetary policy decision. Rising crude oil prices, continued foreign fund outflows and weakness across several heavyweight stocks added to the pressure in early trade.
The 30-share BSE Sensex fell 460 points to 72,599.05 in early trade, while the 50-share NSE Nifty declined 164.80 points to .85. The sell-off came after the indices had gained in the previous two sessions, prompting investors to lock in some profits while awaiting the RBI’s decision on interest rates.
The market later recovered significantly from its morning lows, helped by buying in banking stocks.
The RBI’s policy announcement became the biggest trigger for the market during the session. The central bank raised the repo rate by 25 basis points to 5.50%, marking its first rate increase in nearly four years. It also shifted its policy stance from neutral to calibrated tightening, signalling that further action could depend on inflation and economic growth.
The rate hike had been largely expected by investors, limiting the negative reaction after the announcement. Banking stocks, which had been under pressure in early trade, turned stronger as investors assessed the impact of higher interest rates on lenders.
Private-sector banks gained around 0.4%, while public-sector banks rose nearly 0.8%. Kotak Mahindra Bank, ICICI Bank and Axis Bank were among the key gainers and helped the broader market recover from its lows.
Higher lending rates could support bank margins initially, particularly for loans linked to external benchmarks. However, investors will also watch deposit costs and credit demand as banks adjust to the tighter interest-rate environment.
Kotak Mahindra Bank and ICICI Bank were among the leading gainers, while Titan and Asian Paints were among the major losers. Bharat Electronics, Maruti Suzuki and Mahindra & Mahindra also faced selling pressure.
Titan remained under pressure after the company reported slower jewellery growth during the September quarter. The timing of the festive season affected consumer purchases, raising concerns about near-term demand momentum. The stock’s weakness added to the pressure on the benchmark indices.
Crude oil prices provided another reason for caution. Brent crude was trading around $101.6 a barrel, keeping concerns about inflation and India’s import bill in focus. Higher oil prices can raise input and transportation costs for companies while putting pressure on the country’s external finances.
Foreign investor selling has also remained a major concern for the market. Foreign Institutional Investors sold Indian equities worth ₹2,961.30 crore on Tuesday. Domestic institutional investors have continued to provide some support, but persistent foreign outflows have made it difficult for the market to sustain strong rallies.
The broader market has already experienced a prolonged period of weakness, with Indian equities declining for eight consecutive weeks. The correction has created opportunities for bargain hunters, but investors remain cautious about making aggressive bets until there is greater clarity on interest rates, global markets and corporate earnings.
On the technical front, the 22,500-22,600 region remains an important support zone for the Nifty. A decisive break below 22,550 could push the index towards 22,400 and 22,200. On the upside, 22,850-23,000 remains an important resistance area. A sustained move above 23,000-23,100 could signal a stronger recovery.
The RBI’s economic outlook offered some comfort to investors. The central bank raised its FY27 real GDP growth forecast to 7.1%, up 40 basis points from its earlier projection. It also marginally increased its core inflation estimate to 4.4% from 4.3%.
The combination of stronger growth expectations and tighter monetary policy suggests that the RBI remains confident about the underlying economy while keeping a close watch on inflationary pressures.
Wednesday’s market action showed the competing forces currently driving Indian equities. Higher rates, expensive crude and foreign selling are weighing on sentiment, while strong domestic growth, resilient banking stocks and lower valuations are encouraging investors to buy during sharp declines.
Investors will now watch whether the Nifty can hold the 22,500-22,600 support zone and whether banking stocks can sustain the recovery through the rest of the session.