Markets extend losses even after RBI cuts repo rate, changes stance; Nifty below 22,400, most sectors in red

Indian equity markets traded in the red on Wednesday, April 9, after the Reserve Bank of India (RBI) announced a widely anticipated 25 basis point cut in the repo rate, bringing it down to 6 percent. While the rate cut was the second this year, what caught investors off-guard was the central bank’s shift in policy stance from 'accommodative' to 'neutral', signalling a more measured approach going forward.

Despite this change in tone, the Sensex dropped 554 points to an intra-day low of 73,673.06, while the Nifty50 fell 179 points to touch 22,356.60. Broader markets bore the brunt of the decline, with both the Nifty Midcap and Smallcap indices losing more than 1.5 percent each.

Policy Highlights: Rate Cut and Stance Shift

RBI Governor Sanjay Malhotra announced that all six members of the Monetary Policy Committee (MPC) unanimously voted to reduce the repo rate and alter the stance to neutral. The latest cut follows February’s 25 bps reduction, which had brought the repo rate down to 6.25 percent from 6.5 percent—the first easing move in nearly five years.

Explaining the rationale, Malhotra stated that while the rate cut aims to support economic momentum, a neutral stance allows the RBI flexibility to either raise or lower interest rates, depending on evolving macroeconomic conditions. By contrast, an accommodative stance is geared toward growth-supportive rate reductions, while 'withdrawal of accommodation' typically signals tighter monetary policy to rein in inflation.

Sector Performance: IT, Metal Drag; FMCG Shines

Most sectoral indices traded deep in the red, with rate-sensitive segments bearing the brunt of the selloff. Nifty Realty and Nifty PSU Bank fell over 1.5 percent each, while Nifty Bank and Financial Services were down around 0.5 percent. Nifty Auto traded flat, reflecting a mixed trend.

However, Nifty IT plunged 3 percent amid persistent worries over the US economic outlook and potential tariff-related headwinds. Nifty Metal and Nifty Pharma followed suit, losing 2 percent each. On the other hand, Nifty FMCG bucked the trend with a 1 percent gain, aided by safe-haven buying in a volatile environment.

Among Sensex constituents, PowerGrid, Nestle, HUL, M&M, and ITC were among the top gainers. Meanwhile, Tech Mahindra, Infosys, HCL Tech, Tata Steel, and Eternal posted sharp declines, dragging the index lower.

Growth and Inflation Outlook

On the macroeconomic front, the RBI revised its inflation forecast downward, projecting Consumer Price Index (CPI) inflation at 4 percent for FY26. The quarterly breakup includes 3.6 percent in Q1, 3.9 percent in Q2, 3.8 percent in Q3, and 4.4 percent in Q4. The downward revision comes amid easing food inflation pressures.

In terms of growth, the central bank maintained its FY26 GDP growth forecast at 6.5 percent, with quarterly estimates of 6.5 percent for Q1, 6.7 percent for Q2, 6.6 percent for Q3, and 6.3 percent for Q4. The RBI reiterated confidence in India's economic resilience, citing robust domestic demand and healthy investment activity.

Overall, Wednesday’s market reaction underscores investor sensitivity to shifts in monetary policy direction, especially in the face of global economic uncertainties. While the rate cut offers short-term relief, the shift to a neutral stance has tempered expectations of aggressive easing going forward. Coupled with global headwinds and sector-specific concerns, especially in IT and export-driven industries, near-term volatility may persist despite an encouraging macro backdrop.

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