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Markets continue to trade lower after RBI cuts India’s GDP growth forecast
Apr-09-2025

Indian equity markets remained under pressure and were trading lower with cut of over half percent as market participants indulged in reducing their positions. Meanwhile, the broader markets were facing the heat of selling; the BSE mid-cap index dropped by 1.54 per cent and the small-cap index was down 1.66 per cent. Weak cues from the global markets weighed on the domestic sentiments. Further, traders were cautious as the Reserve Bank of India (RBI) said the global economic outlook is facing new challenges due to recent trade tariff announcements. These developments have caused sharp falls in the dollar index, equity markets, and crude oil prices. The RBI added that this uncertainty is a fresh risk to both global and Indian growth. The RBI’s rate setting Monetary Policy Committee cut India’s GDP growth forecast for this fiscal year (FY26) to 6.5% from 6.7% growth projected earlier.

On the global front, Asian markets were trading in red as traders remained concerned about rising tensions between the U.S. and China amid the new reciprocal tariffs on imports in to the US. Back home, shares of gold financing companies, Muthoot Finance and IIFL Finance, dropped after RBI Governor Sanjay Malhotra announced that the central bank will be releasing comprehensive guidelines on gold loans.

The BSE Sensex is currently trading at 73834.25, down by 392.83 points or 0.53% after trading in a range of 73673.06 and 74103.83. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.54%, while Small cap index down by 1.66%.

The only gaining sectoral indices on the BSE were FMCG up by 1.44% and Auto up by 0.58%, while Realty down by 2.47%, IT down by 2.39%, TECK down by 1.80%, Metal down by 1.73% and Industrials down by 1.59% were the top losing indices on BSE.

The top gainers on the Sensex were Nestle up by 2.75%, Hindustan Unilever up by 2.31%, Power Grid up by 1.97%, Mahindra & Mahindra up by 1.48% and ITC up by 1.45%. On the flip side, Tech Mahindra down by 2.78%, Eternal down by 2.39%, Infosys down by 2.39%, Tata Steel down by 2.07% and HCL Technologies down by 2.01% were the top losers.

Meanwhile, the rating agency ICRA estimated the incremental credit to rise by 10.8 per cent to Rs 19-20.5 trillion in the current fiscal (FY26) compared to Rs 18 trillion or a 10.9 per cent growth in 2024-25. The agency expects the regulatory easing seen in recent months to support a credit expansion of about 10.8 per cent in FY2026. The regulatory measures include the repo rate cut, deferment of proposed changes in the liquidity coverage ratio (LCR) framework and additional provisions on infra projects, along with the roll-back of increased risk weights on lending to unsecured consumer credit and non-banking financial companies (NBFCs).

Besides, the rating agency also expects that the durable liquidity infusion by the Reserve Bank of India (RBI) through open market operations (OMO) by way of purchases of Government bonds and forex swaps with banks, would aid the liquidity and faster transmission of the ongoing cut in policy rates. It added that the pace of credit expansion is expected to trail the recent highs seen in FY2024. However, the persisting challenges in deposit mobilisation, high credit-deposit (CD) ratio and rising stress in the unsecured retail and small business loans would remain a drag on credit growth. It has also indicated that pro-growth regulatory stance has revived the lenders' appetite for credit growth in Q4 FY2025 after a brief period of slow incremental credit growth in the initial period of FY2025. Meanwhile, the RBI’s recent announcements of liquidity injections are likely intended to nudge a faster transmission of rate cuts.

According to ICRA, the one the key challenges faced by the banking sector in the last few years is raising deposits at competitive pricing, especially retail deposits, given the pressure on the liquidity coverage ratio (LCR), meanwhile, the increasing competition from other investment avenues and the investors' preference for term deposits have led to a reduction in the share of low-cost current and savings account (CASA) balances, impacting the banks' cost of funds. The rating agency expects these to persist in the near term, which is likely to delay the transmission of rate cuts by the RBI to banks' cost of funds, in spite of the recent liquidity measures, thereby impacting the banks' margins.

The CNX Nifty is currently trading at 22408.40, down by 127.45 points or 0.57% after trading in a range of 22353.25 and 22468.70. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Nestle up by 2.87%, Hero MotoCorp up by 2.53%, Hindustan Unilever up by 2.46%, Power Grid up by 1.87% and Bajaj Auto up by 1.71%. On the flip side, Wipro down by 4.69%, Tech Mahindra down by 2.76%, Trent down by 2.63%, Infosys down by 2.44% and Shriram Finance down by 2.28% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 273.9 points or 1.38% to 19,853.78, Jakarta Composite plunged 19.71 points or 0.33% to 5,976.43, Straits Times fell 84.59 points or 2.5% to 3,384.88, KOSPI dropped 47.40 points or 2.07% to 2,286.83, Nikkei 225 slipped 1384.4 points or 4.38% to 31,628.18 and Taiwan Weighted lost 1068.19 points or 6.14% to 17,391.76. However, Shanghai Composite strengthened 20.42 points or 0.64% to 3,165.97.
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