India’s Nifty 50, Sensex hit record highs as small caps gain; RBI awaited

Investing.com-- India’s Nifty 50 and Sensex stock benchmarks hit record highs in early trade on Thursday, boosted by financial and industrial stocks, while small cap stocks also boosted sentiment after a key gauge wiped out all recent losses made on a regulatory warning. 

TheNifty 50 hit a record high of 22,602.50 points shortly after the open, while the BSE Sensex 30 logged a lifetime peak of 74,453.82 points. Both indexes were boosted chiefly by gains in heavyweight industrials and financial stocks, with HDFC Bank Ltd (NS:HDBK) and NTPC Ltd (NS:NTPC) leading gains on both benchmarks.

Sentiment towards Indian markets was boosted by the Nifty Smallcap 250 index- a key gauge of hot stocks with small market capitalization- rebounding to a one-month high. The gauge essentially erased all losses made in early-March, after India’s securities flagged the risk of a potential bubble in the country’s small-cap stocks. 

But further gains in Indian markets were held back by anticipation of a Reserve Bank of India meeting on Friday, while investors also hunkered down before the 2024 general elections later in April.

Both the Nifty and Sensex consolidated early gains and traded sideways by 10:16 IST (04:46 GMT). 

RBI set to hold rates, CPI and GDP outlook in focus 

The RBI is widely expected to hold its policy repo rate at a near six-year peak of 6.5% at the conclusion of a meeting on Friday.

But the bank’s outlook on the path of consumer price index inflation, as well as gross domestic product, will be closely watched for more cues on the Indian economy.

The RBI has repeatedly stressed on the need for tighter monetary policy in the face of a potential spike in CPI inflation, especially amid volatile food and fuel prices. 

A recent uptick in global oil prices could also potentially factor into a stickier outlook for Indian inflation, given that the country is one of the world’s biggest importers of crude.

But the RBI has also largely maintained a positive outlook on the Indian economy, which has been the fastest-growing major economy for the last two years. 

India’s GDP growth is expected to remain around 6% to 7% in the coming fiscal year.

The RBI is also expected to only signal potential interest rate cuts by mid-2024, a recent Reuters poll showed.

Beyond the RBI, Indian markets are also expected to see some volatility before the 2024 general elections, which begin later in April. 

Incumbent Prime Minister Narendra Modi is widely expected to win a third term- a scenario that presents more upside for Indian markets. Indian and foreign investors have largely welcomed Modi’s business-first policies over the past 10 years, which are credited with India’s stellar economic growth in recent years.