Indian shares slip after central bank holds rates steady

BENGALURU (Reuters) – Indian shares inched lower on Friday after the country’s central bank kept interest rates unchanged as widely expected and unveiled liquidity support measures, with investors focusing on rising inflationary pressures.

By 0608 GMT, the NSE Nifty 50 index and the S&P BSE Sensex were down 0.2% each at 15,660.05 and 52,120.06, respectively.

The country’s benchmark 10-year bond yield was nearly flat after the decision, while the Indian rupee depreciated to 73.1175 against the dollar before clawing back to 73.02.

The Reserve Bank of India (RBI) held the repo rate, its key lending rate, at 4% and kept the reverse repo rate, the borrowing rate, unchanged at 3.35%.

Analysts said there were no major surprises to lift the markets higher even though the central bank assured ample liquidity.

“The cause of concern for investors now is inflation which seems to outweigh the benefits of cheaper credit,” said Gaurav Garg, head of Research at CapitalVia Global Research.

“Inflation and the pandemic are expected to impact the real income and purchasing power of end users, thereby impacting the first-quarter numbers. This will cause markets to consolidate here for a while or take a correction.”

On Friday, the Nifty bank index and metals index were the top drags, down 0.6% and 0.4%, respectively.

The blue-chip Nifty 50 and the Sensex have risen over 5% each since the central bank’s last meeting in April, boosted by robust corporate results and a fall in daily COVID-19 cases.

“Overall, the policy is good. There is some softness in the market as they have seen a good amount of run-up in the past few days,” said Saurabh Jain, assistant vice president research, SMC Global Securities.

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