Indian benchmark indices opened lower on Wednesday as investors turned cautious ahead of the Reserve Bank of India’s monetary policy decision, with the central bank widely expected to raise the repo rate by 25 basis points. The Sensex opened at 72,965.38 and was trading at 72,670.99 at 9:31 am, down 396.82 points or 0.54%. The Nifty 50 opened at 22,690.45 and stood at 22,625.15, down 148.70 points or 0.65%. Rising crude oil prices, continued foreign portfolio investor outflows and broad-based weakness across sectors weighed on sentiment.

The decline came after both indices had gained for two consecutive sessions. The Nifty had risen 0.98% on Tuesday, while the Sensex gained 0.95%, providing some relief after the benchmarks had recorded their longest weekly losing streak in 25 years. Investors were now awaiting the RBI’s policy decision, which is expected to include the first repo rate hike since February 2023. While the rate increase has largely been factored into market prices, attention is expected to remain on RBI Governor Sanjay Malhotra’s comments on inflation, economic growth and the future direction of monetary policy.

Crude oil prices emerged as another concern for domestic equities, with Brent crude rising about 1.1% to $101.7 per barrel. Market strategist Dr V K Vijayakumar said the recent recovery in Indian equities could face pressure from crude prices and continued foreign portfolio selling. He noted that Brent moving back above $101 could make it difficult for the market to sustain its recent gains. Higher oil prices are a concern for India because they can increase the import bill and add pressure on inflation and the rupee, potentially complicating the RBI’s efforts to balance growth, price stability and currency conditions.

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Foreign portfolio investor outflows also remained a drag on sentiment despite continued support from domestic liquidity. Vijayakumar said there were no clear signs of a reversal in foreign selling and pointed to the narrowing interest-rate differential between India and the United States as another concern. The rupee had also touched a two-month low in the previous session, adding to pressure on policymakers. Rising US yields and a stronger dollar could further influence capital flows and currency stability, making the RBI’s policy stance and guidance particularly important for investors.

The market decline was broad-based, with all 16 major sectoral indices trading in negative territory in early deals. The Nifty Financial Services 25/50 index fell 0.49%, while private banks declined 0.67% and PSU banks dropped 0.73%. The Nifty Auto index fell 0.86%, FMCG declined 0.71%, metals dropped 1.09% and consumer durables fell 1.19%. Realty slipped 0.42%, oil and gas fell 0.54% and the Nifty IT index declined 0.46%. Titan was the biggest Sensex loser, falling 3.56%, while Asian Paints, BEL, Maruti and Axis Bank also declined. Bajaj Finance, Bharti Airtel and Eternal were among the few gainers.

The broader market also remained weak, although small-cap stocks showed some resilience. The Nifty 100 fell 0.61%, Nifty 200 declined 0.54% and Nifty 500 dropped 0.47%, while the Nifty Midcap 50 and Midcap 100 slipped 0.32% and 0.29%, respectively. The Nifty Smallcap 100 gained 0.15%, while India VIX rose 3.27%, signalling increased volatility ahead of the RBI decision. Investors will now closely track the repo rate decision, the central bank’s assessment of inflation and growth, crude oil prices, the rupee and foreign fund flows to determine whether the recent recovery in equities can continue.

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