Indian Stocks Start Mildly Higher Ahead of RBI Policy Decision

On Wednesday, Indian equity markets opened with a slight uptick as investors reacted to the impending policy outcomes expected later this week from the Reserve Bank of India (RBI). At the onset of trading, the Sensex registered a modest gain, increasing by 0.02% or 20 points to settle at 80,865.77. Similarly, the NSE Nifty rose by 0.03%, climbing 7.55 points to a level of 24,464.7.

Buying was observed across various sectors, although the pharma and media indices showed some weakness.

The Nifty Bank index also traded positively, buoyed by gains from key players like HDFC Bank, Canara Bank, and AU Bank among others.

Dr. V K Vijayakumar, the Chief Investment Strategist at Geojit Financial Services, commented on the current market condition, stating, "The signals from the market are a bit confusing. It has ignored the sharp slowdown in Q2 GDP growth and remains resilient despite significant selling from foreign institutional investors (FIIs). There are several potential headwinds arising from the Trump presidency. The valuations are elevated, with the Nifty trading at approximately 20 times the estimated earnings for FY26. Given this backdrop, it is wise for investors to adopt a cautious investment approach, emphasizing asset allocation as a foundational principle."

Despite the market's challenges, it is advisable for investors to stay committed to their investments. Vijayakumar further suggested that investors with a lower risk tolerance may want to consider reallocating funds from overvalued mid and small-cap stocks into larger-cap stocks and possibly into debt instruments.

The recent actions of FIIs turning to buyers is a positive indicator that could help sustain the performance of large-cap stocks. In the previous trading session, FIIs purchased equities valued at ₹3,426.39 crore in the cash market.

Prashanth Tapse, Senior VP (Research) at Mehta Equities, pointed out that GIFT Nifty indicates a cautious start, with close attention paid to the upcoming speech by Fed Chair Jerome Powell. Additionally, political tensions are growing as Donald Trump puts pressure on BRICS to refrain from making any moves regarding new currencies. Notably, US Steel shares dropped by 8% after Trump opposed a $15 billion acquisition by Japan's Nippon Steel.

Key upcoming events to watch include the RBI's Monetary Policy Committee meeting decision on Friday, as well as the US non-farm payroll data.

Asian Market Performance

The MSCI Asian ex-Japan index was trading lower, down by 0.4% at a level of 584.09. Among the regional indices, Hong Kong’s Hang Seng and Singapore's Straits Times saw gains, while Japan's Nikkei index declined by 0.4%.

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