Cautious Markets Await RBI MPC Decision Amid AI Trade Concerns

Indian equity benchmarks opened cautiously, slipping into the red, ahead of the Reserve Bank of India's MPC decision. Weak global cues, Big Tech sell-off, and uncertainties over AI spending pressured markets. Key indices like Nifty and Sensex dropped slightly, with investors eyeing key policy outcomes for future direction.

The domestic equity markets opened cautiously on Friday, slipping into negative territory as investors kept to the sidelines, anticipating the Monetary Policy Committee (MPC) decision of the Reserve Bank of India (RBI) amidst weak global cues. At opening, the Nifty 50 fell 37 points, or 0.14%, to 25,605.80, and the BSE Sensex dropped 64.61 points, or 0.08%, to 83,249.32.

With the RBI scheduled to announce the MPC decision at 10 AM, market participants remained wary. Ajay Bagga, a banking and market expert, told ANI, "Indian markets are expected to remain weak due to global cues. However, funds moving away from the AI market turmoil could eventually target uncorrelated markets like India. We anticipate the MPC to maintain a neutral policy stance with no rate changes today." Additionally, changes to GDP and Inflation base years are set for this month, with updated data next week, influencing the RBI's steady GDP and Inflation forecast. Optimism persists regarding potential India-EU and India-US trade deals.

Investor sentiment was further dampened by the Big Tech sell-off and concerns about AI spending, impacting global markets. Negative sentiment from the US markets led to weak Asian market openings, with South Korea's Kospi index plummeting by 5%. The pressure on the AI trade continues as investor scepticism about significant AI spending grows.

IT services face new challenges from AI-based coding firms like Anthropic, potentially affecting software output and margins. On the National Stock Exchange, the Nifty 100 lost 0.10%, the Nifty Smallcap fell 0.9%, and the Nifty Midcap declined by 0.34%. Sectoral indices such as FMCG, Private Bank, and Realty showed slight gains, while others faced downward pressure. The Nifty IT index declined over 1%, with Media stocks and Nifty Pharma down by 0.8%. In commodities, gold prices fell by nearly 1% to Rs 150,890 per 10 grams, and silver dropped 3.4% to Rs 235,485 per kilogram.

Overall, the markets stayed low in anticipation of the RBI MPC outcome of the day and continued to track global developments carefully.