Nifty slips as RBI shifts to calibrated tightening

The Nifty ended lower after the Reserve Bank of India raised its policy rate and signalled a tighter path. The move came against a mixed backdrop: Wall Street had closed at records, but Asian markets were uneven, crude was higher and the rupee weakened during the session.

The reported stock-level picture was divided. Titan was among the session’s weakest large stocks, with market coverage linking the pressure to concerns about jewellery growth in its quarterly business update. Kotak Mahindra Bank and other financial shares were reported firmer after the policy announcement, helping the indices recover some early losses. A complete closing contribution breakdown was not available.

The RBI’s six-member Monetary Policy Committee unanimously raised the repo rate by 25 basis points to 5.50% and changed its stance from neutral to calibrated tightening by a 4-2 vote. Governor Sanjay Malhotra said near-term rate cuts were off the table and that the next policy move could be a hike or a pause. The rate increase had been widely expected; the stance change and the signal on future cuts were the more consequential messages for rate-sensitive shares and borrowing costs.

The RBI raised its FY27 CPI inflation forecast to 5.2% from 5.0% and its real GDP growth forecast to 7.1% from 6.7%. It projected inflation at 6.0% in the December quarter and 5.7% in the March quarter. The combination of stronger growth and higher inflation expectations points to a less supportive rate outlook for valuations, even as the higher growth projection offers support to the earnings outlook.

No CPI, IIP, GST, trade or PMI release for October 7 was confirmed in the material reviewed. The latest reported cash-market flow data were for October 6: foreign institutional investors sold Rs 2,961.30 crore of equities, while domestic institutions bought Rs 5,088.92 crore.

US equities had advanced to record closes on October 6 as Treasury yields eased and attention shifted towards the coming earnings season. Asian trading on October 7 was mixed, with reports describing weaker markets in parts of the region. For Indian equities, the external support from Wall Street was tempered by the higher oil price and the RBI’s hawkish signal.

Reports linked the rise in crude to storm risks to US oil output and heightened regional supply concerns, including Houthi attacks on Saudi Arabia; additional Middle East supply partly offset those risks. Higher crude is a vulnerability for India’s import bill and inflation outlook. The day’s sector readings showed energy shares holding up, but the available reporting did not establish a specific cause for the broader capital-markets, paints and building-materials, metals, mining or diversified-sector moves.

The rupee weakened to an intraday low of Rs 96.73 per US dollar, while the 10-year government bond yield rose after the policy decision. Those moves are consistent with markets reassessing the rate and inflation outlook, though the available reports do not establish that the RBI decision alone drove either market.

Titan’s Q2 FY27 business update reported about 25% year-on-year growth across consumer businesses, including 21% growth in jewellery and 22% growth in domestic business. Despite those gains, market reports said analysts viewed jewellery growth as weaker than expected, and Titan came under pressure. No numerical consensus estimate was available to quantify the gap.

Among disclosed corporate developments, Container Corporation received an Rs 87.15 crore order from Southern Railway for wagons, while Axis Solutions reported an Rs 43.51 crore order from John Cockerill Hydrogen Belgium. These are company-specific contract announcements; their eventual contribution to revenue was not stated.