Last Updated on August 5, 2026 8:38 pm by INDIAN AWAAZ
Growth Upgrade, Softer Inflation Outlook Lift Investor Confidence
BY Our Business Correspondent
Indian equity benchmarks closed in positive territory on Wednesday after the Reserve Bank of India (RBI) maintained the policy repo rate at 5.25 per cent and retained its neutral monetary policy stance, reinforcing confidence that the central bank remains focused on balancing inflation control with growth support. Investor sentiment also received a boost after the RBI marginally upgraded its FY2026-27 real GDP growth forecast to 6.7 per cent while lowering its consumer inflation projection to 5.0 per cent for the current financial year.
The positive domestic policy outcome, coupled with continued foreign institutional investor (FII) inflows, resilient global market cues and easing crude oil prices during much of the trading session, helped equities extend their gains. Although benchmark indices ended with modest advances, the broader market outperformed significantly, reflecting improved risk appetite among investors.
The BSE Sensex gained 152.05 points, or 0.19 per cent, to close at 78,581, while the Nifty 50 advanced 9.75 points, or 0.04 per cent, to settle at 24,624.65, comfortably above the psychologically important 24,600 level.
Market participants largely interpreted the RBI’s policy decision as supportive for economic growth while signalling that inflation risks remain under close watch.
RBI Maintains Status Quo
At the conclusion of its three-day Monetary Policy Committee (MPC) meeting held between August 3 and August 5, the RBI unanimously decided to leave the benchmark repo rate unchanged at 5.25 per cent.
Accordingly, the Standing Deposit Facility (SDF) rate remains at 5.00 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.50 per cent.
More importantly, the six-member committee retained its neutral policy stance, indicating that future policy decisions will continue to depend on incoming macroeconomic data rather than any predetermined rate trajectory.
Financial markets had widely expected a status quo on rates, but the upward revision in the growth forecast and the slightly softer inflation outlook were viewed as positive surprises.
Growth Forecast Revised Higher
In one of the key announcements of the policy review, the RBI raised its estimate for India’s real GDP growth in FY27 to 6.7 per cent, compared with 6.6 per cent projected earlier.
Quarter-wise projections indicate:
- Q1 FY27: 7.0%
- Q2 FY27: 6.4%
- Q3 FY27: 6.5%
- Q4 FY27: 6.8%
The central bank also projected 7.3 per cent growth for the first quarter of FY28.
According to the RBI, domestic economic activity continues to be supported by robust private consumption, sustained government capital expenditure, healthy investment activity and resilient services exports.
The central bank believes that India’s growth momentum remains relatively strong despite persistent uncertainties in the global economy.
Inflation Outlook Improves
The RBI simultaneously lowered its headline retail inflation projection for FY27 to 5.0 per cent, down from the earlier estimate of 5.1 per cent.
Its quarterly inflation projections stand at:
- Q2 FY27: 4.7%
- Q3 FY27: 5.9%
- Q4 FY27: 5.5%
Inflation for the first quarter of FY28 has been estimated at 5.3 per cent, while core inflation is expected to average around 4.3 per cent during FY27.
The RBI noted that while underlying inflation remains moderate, food prices and fuel-related supply-side pressures could continue to influence headline inflation.
However, policymakers cautioned that uncertainties surrounding global crude oil prices, geopolitical tensions, global trade policies and uneven monsoon conditions linked to El Niño continue to pose risks to both growth and inflation.
The central bank reiterated that it would remain data-dependent and continue pursuing its objective of aligning inflation with its medium-term target while supporting sustainable economic expansion.
Market Reaction
Equity markets responded positively to the policy announcements.
Real estate developers and automobile manufacturers led sectoral gains as investors interpreted the RBI’s steady policy approach as favourable for credit demand and consumption.
Rate-sensitive sectors generally witnessed buying interest during the session.
However, defensive segments including FMCG, pharmaceuticals and parts of the banking sector underperformed amid profit booking.
Among the Nifty constituents, Shriram Finance emerged as one of the strongest performers with a gain of 3.23 per cent, followed by Larsen & Toubro, which rose 1.68 per cent, while State Bank of India added 1.18 per cent, providing significant support to benchmark indices.
Market analysts observed that the Nifty continues to trade within a consolidation range.
From a technical perspective, immediate resistance is seen around 24,775, while 24,530 remains an important support level for the near term.
Broader Markets Outperform
The broader market once again outpaced frontline indices, signalling improved participation beyond large-cap stocks.
The BSE MidCap Index advanced 0.34 per cent, while the BSE SmallCap Index climbed 0.70 per cent, reflecting continued investor interest in mid-sized and emerging companies.
Market breadth also remained favourable.
On the BSE:
- 2,330 stocks advanced
- 1,911 stocks declined
- 216 shares remained unchanged
The positive breadth suggested that buying interest remained widespread despite relatively modest gains in benchmark indices.
Services Sector Shows Slower Expansion
Fresh macroeconomic data released during the day painted a mixed picture of India’s economy.
According to the latest HSBC India Services PMI, business activity remained in expansion territory during July, although growth slowed sharply.
The Services Business Activity Index declined to 53.3 in July from 57.4 in June, marking the weakest pace of expansion in 53 months.
Since any reading above 50 indicates expansion, the sector continues to grow, albeit at a slower pace.
Similarly, the HSBC India Composite PMI eased to 54.3 from 57.1, representing the slowest expansion in private-sector activity since March 2022.
Despite moderation in output growth, employment continued to rise while business confidence remained positive, although optimism slipped to a seven-month low.
Bond, Currency and Commodity Markets
Government bond yields eased after the RBI policy announcement, indicating stable expectations regarding future interest rates.
The yield on India’s benchmark 10-year government bond declined to around 6.787 per cent, compared with 6.816 per cent in the previous session.
The Indian rupee also strengthened modestly against the US dollar, trading near 95.15 compared with the previous close of 95.28.
Gold prices continued their upward trajectory.
MCX Gold futures for October delivery rose over 1.3 per cent to approximately ₹1,46,186 per 10 grams as investors sought safe-haven assets amid lingering geopolitical uncertainty.
The US Dollar Index remained broadly steady near 99.70, while the benchmark US 10-year Treasury yield edged lower.
Global Markets Mixed
Global market sentiment remained cautiously optimistic.
Asian equity markets ended mostly higher after Wall Street touched fresh record highs overnight, supported by strong corporate earnings and continued enthusiasm surrounding artificial intelligence-related companies.
Investor optimism also received support from easing expectations of an immediate US Federal Reserve rate increase, although policymakers continue to maintain a cautious stance on inflation.
European markets, however, traded lower after renewed geopolitical tensions in the Middle East dampened risk appetite.
Reports of a Houthi ballistic missile strike on a Saudi oil tanker and continued uncertainty surrounding shipping through the Strait of Hormuz prompted investors to adopt a more cautious approach.
Meanwhile, macroeconomic data from Europe presented a mixed picture.
The UK’s Services PMI returned to expansion territory during July, while eurozone producer prices declined month-on-month, reflecting easing energy costs.
Corporate Earnings Drive Stock-Specific Action
Corporate earnings remained the principal driver of individual stock movements.
Bharti Airtel gained after reporting strong first-quarter results, with consolidated net profit rising more than 41 per cent year-on-year, supported by robust growth across its India and Africa operations.
Ola Electric Mobility rallied sharply after announcing its entry into the utility-scale battery energy storage segment through an agreement aimed at deploying large-scale battery energy storage systems over the coming years.
Castrol India advanced after reporting healthy growth in both revenue and profit during the latest quarter.
Deepak Nitrite also attracted investor interest after posting more than a threefold increase in quarterly profit driven by stronger revenues and margin expansion.
Among pharmaceutical companies, Shilpa Medicare witnessed significant buying after reporting a sharp jump in quarterly earnings supported by broad-based growth across formulations, APIs and biologics.
On the other hand, Protean eGov Technologies declined sharply after reporting a steep fall in quarterly profitability despite healthy revenue growth, as higher investments and rising costs weighed on margins.
Kalyan Jewellers also came under pressure despite reporting higher revenue and profit, suggesting that investors may have booked profits following recent gains.
ONGC ended lower even after reporting a sharp rise in quarterly earnings, while Godrej Properties advanced despite posting lower profits, indicating that investors focused on longer-term business prospects rather than short-term earnings.
IPO Market Remains Active
Primary market activity continued to remain healthy.
The initial public offering of Ardee Industries received encouraging investor participation on its opening day, with the issue being subscribed nearly three times by late afternoon.
The IPO, which is priced in the band of ₹50-53 per share, will remain open for subscription until August 7.
Meanwhile, newly listed Manipal Health Enterprises made a strong market debut.
The stock closed at ₹666.70, representing a premium of about 13 per cent over its issue price of ₹590, reflecting healthy investor demand for quality healthcare businesses.
Outlook
With the RBI maintaining policy stability while modestly improving its growth outlook, investors are likely to focus on incoming corporate earnings, inflation trends, monsoon progress and global geopolitical developments.
Continued FII inflows, stable domestic macroeconomic fundamentals and expectations of sustained government infrastructure spending remain supportive factors for Indian equities. However, elevated global uncertainties—including crude oil volatility, geopolitical risks and external monetary policy developments—may continue to influence market direction in the weeks ahead.
Disclaimer: This report has been prepared using market data and publicly available corporate disclosures available at the time of publication. Equity market investments are subject to market risks, and readers should consult qualified financial advisers before making investment decisions.