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Bank shares dip in India as investors brace for RBI policy decision
The Nifty Bank index fell 1.0% as retail inflation rose to 4.4% in June above the RBI’s 4.0% target, keeping traders focused on possible hawkish guidance.
Bank stocks in India slipped on Tuesday as investors grew cautious ahead of the Reserve Bank of India’s monetary policy decision scheduled for August 5, with sentiment pressured by persistent inflation, geopolitical tensions in West Asia, and uncertainty around the direction of future policy.
The Nifty Bank index dropped 1.0%, trading down to an intraday low of 57,651.15, reflecting broad selling across private sector lenders. Federal Bank led the decline, falling more than 3%, while Axis Bank lost over 1.5% and several other lenders including AU Small Finance Bank, HDFC Bank, State Bank of India, ICICI Bank, and IndusInd Bank declined between 0.5% and 1%.
While market expectations center on the RBI holding interest rates unchanged, investors are watching for hints that the stance could turn more hawkish to address inflation risks. Retail inflation accelerated to 4.4% in June, moving above the RBI’s medium-term target of 4.0%, after the MPC kept the repo rate unchanged at 5.25% at its previous June meeting.
According to a Reuters poll cited by LiveMint Markets, 68 of 72 economists surveyed expect the RBI to leave the policy rate unchanged. The RBI’s decision is set for 10:00 a.m. on August 5, followed by Governor Sanjay Malhotra’s press conference at 12:00 p.m.