Indian equity markets extended intraday losses in early trade on Friday after the Reserve Bank of India (RBI) maintained a status quo in its latest policy announcement. In line with Street expectations, the Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, retained its neutral stance and left all key interest rates unchanged, with the benchmark repo rate held at 5.25%.

Reacting to the policy decision, the BSE benchmark Sensex declined as much as 368 points, or 0.44%, to 82,946, while the NSE Nifty dropped 147 points, or 0.57%, to 25,496. Broader markets witnessed sharper selling pressure, with the Nifty Midcap 100 and Nifty Smallcap 100 indices falling more than 1% each. The Bank Nifty slipped 0.55%, dragged down by selling in rate-sensitive banking stocks.

The India VIX, the market’s fear gauge, edged up 0.8% to 12.07, indicating mild caution among investors.

Market sentiment weakened after the RBI marginally revised upward its inflation outlook for the first half of FY27, amid uncertainty over growth and inflation estimates due to the upcoming rollout of a new data series. Rising commodity prices and a weaker currency also pose upside risks to inflation.

The RBI MPC unanimously retained a neutral policy stance, while it raised FY26 GDP growth forecast to 7.4% and kept CPI inflation projection at around 2.1%.

TCS, Tech Mahindra, Trent, Eternal, SBI, Adani Ports lead fall

Among Sensex constituents, 19 of the 30 stocks traded in the red, led by IT heavyweights TCS, Tech Mahindra and Infosys. Tata Consultancy Services (TCS), the most valued IT stock, topped the losers’ chart, falling 2.5%, followed by Tech Mahindra, which declined 2.02%.

Trent, Eternal, State Bank of India, Adani Ports and Infosys were among other notable laggards, declining between 1.5% and 2%.

On the gaining side, ITC emerged as the top performer, rising 1.63%, followed by Kotak Mahindra Bank, which advanced 1.03%, and Power Grid Corporation, up 1.00%. Bharti Airtel gained 0.77%, while Bajaj Finance, Axis Bank, ICICI Bank and Reliance Industries also traded in positive territory, rising up to 0.44%. Larsen & Toubro remained largely flat with marginal gains.

Among sectoral indices, IT stocks led the losses, with the Nifty IT index tumbling 1.81%. Metal, pharma, PSU bank and realty indices also declined, falling up to 1.28%. Auto, healthcare and consumer durable stocks traded in the red, while financial services and private banking indices witnessed relatively limited losses, slipping up to 0.40%. Meanwhile, the FMCG index remained largely stable, while the oil & gas index traded flat.

Policy shifts towards liquidity management

According to market analysts, the RBI’s decision to keep policy rates unchanged was broadly in line with expectations, as the policy focus appears to have shifted towards more effective liquidity management amid currency instability and sticky bond yields, despite cumulative easing of 125 basis points during calendar year 2025.

“The inflation outlook remains comfortable, although the FY26 forecast has seen a slight uptick to 2.1% from 2.0%. While the possibility of a further 25 basis points rate cut in upcoming policy meetings cannot be entirely ruled out, it appears unlikely, particularly in light of the India–US trade deal announcement, healthy GDP growth, contained CPI inflation, and improving credit growth trends,” said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said the MPC’s decision was fully in line with expectations in terms of both rates and stance. “While uncertainty remains around growth and inflation estimates as we await the new data series, the uptick in commodity prices and a weaker currency could pose upside risks to inflation. We therefore see limited room for additional repo rate easing, with the RBI’s focus likely to shift towards ensuring liquidity stability in the year ahead,” she said.

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