RBI Monetary Policy: Bank Nifty rises 1% as policy stance changed to ‘Neutral’

RBI Monetary Policy meeting: The Bank Nifty gained more than 1% post the monetary policy outcome on Wednesday, October 9, following a shift in stance by India's rate-setting panel.

The Bank Nifty opened at 51,021 today. The index gathered strength after the monetary policy decision, hitting the day's high of 51,606, an increase of over 1% from the previous close.

Governor Shaktikanta Das announced that the rate-setting panel has kept the benchmark repo rate unchanged at 6.5% for the tenth consecutive meeting. However, the MPC shifted its policy stance from 'withdrawal of accommodation' to 'neutral'.

Change in stance opens doors for future rate cuts

The market was already anticipating no rate cut in today's policy meeting as inflationary risks have not fully abated. Further, rising crude oil prices amid the Iran-Israel war pose a risk. Concerns around food inflation continue to linger, said analysts. Furthermore, while the economic growth has been healthy, there are some early signs of softness.

Nevertheless, since the RBI may want to retain the flexibility to be able to cut rates if needed, a change in stance was anticipated and the RBI did not disappoint either. The change in stance opens doors for possible rate cuts in the next few meetings.

Bank Nifty moves close to crucial 50-EMA

On the technical front, Bank Nifty saw a decent pullback on Tuesday as it closed above the 51,000 zone (up 1.07%) with most of the frontline banking stocks picking up from their lows. However, for the bias to improve overall, it needed to breach above the significant 50-EMA of 51,800 levels as per Vaishali Parekh Vice President - Technical Research PL Capital Group - Prabhudas Lilladher.

The Bank Nifty post RBI monetary policy outcome has moved close to the 50-day exponential moving average or 50-EMA.

The index has important support near the previous low made at the 49,600 level which needs to be sustained for now to keep the trend intact, as per Parekh.

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