The benchmark indices were trading near the day's low with modest losses in the mid-afternoon trade. The Nifty slipped below the 16,350 level after hitting the day's high of 16,514.30 in mid-morning trade. Shares of realty, media and PSU banks advanced while FMCG, oil & gas stocks and consumer durables declined. Market turned volatile after the RBI announced a hike in the key repo rate by 50 basis points to 4.90%. At 14:25 IST, the barometer index, the S&P BSE Sensex, was down 210.94 points or 0.38% to 54,896.40. The Nifty 50 index fell 67 points or 0.41% to 16,349.35. In the broader market, the S&P BSE Mid-Cap index fell 0.16% while the S&P BSE Small-Cap index shed 0.22%. The market breadth was negative. On the BSE, 1,587 shares rose and 1,666 shares fell. A total of 131 shares were unchanged.

Economy:

The World Bank has trimmed its growth forecast for India for the current financial year to 7.5%, marking a 1.2 percentage points cut down from its previous forecast of 8.7%. World Bank said it cut India's GDP growth forecast due to rising inflation, supply chain disruptions, and geopolitical tensions. The bank now sees India's growth slowing further to 7.1% in FY24. This is 30 basis points higher than the previous forecast of 6.8%. For FY25, GDP growth has been kept at 6.5%.

RBI Policy Action:

RBI's Monetary Policy Committee (MPC) met on 6th, 7th and 8th June 2022. Based on an assessment of the macroeconomic situation and the outlook, the MPC voted unanimously to increase the policy repo rate by 50 basis points to 4.90%, with immediate effect.

Consequently, the standing deposit facility (SDF) rate stands adjusted to 4.65%; and the marginal standing facility (MSF) rate and the Bank Rate to 5.15%. The MPC also decided unanimously to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

With the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of $105 per barrel, inflation is now projected at 6.7% in 2022-23, with Q1 at 7.5%; Q2 at 7.4%; Q3 at 6.2%; and Q4 at 5.8%, with risks evenly balanced.

Around 75% of the increase in inflation projections can be attributed to the food group. Further, the baseline inflation projection of 6.7% for 2022-23 does not take into account the impact of monetary policy actions taken today.

Numbers to Track:

The yield on 10-year benchmark federal paper fell to 7.505% as compared with 7.518% at close in the previous trading session.

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 77.7675, compared with its close of 77.78 during the previous trading session.

MCX Gold futures for (3 June 2022) settlement fell 0.03% to Rs 50,953.

The US Dollar index (DXY), which tracks the greenback's value against a basket of currencies, rose 0.33% to 102.65.

In the commodities market, Brent crude for August 2022 settlement rose 20 cents or 0.17% at $ 120.77 a barrel.

Buzzing Index:

The Nifty FMCG index fell 0.91% to 37,307.45, sliding for the fourth day. The index has declined 3.09% in four trading sessions.

Among the components of the Nifty FMCG index, Marico (down 1.68%), United Spirits (down 1.65%), Dabur India (down 1.62%), ITC (down 1.5%) and Hindustan Unilever (down 0.98%) were the top losers.

Stocks in Spotlight:

Yes Bank rose 0.61% to Rs 13.16 after the bank said that its board has recommended constitution of alternate board for approval of shareholders at the ensuing AGM. The board of directors of the bank has resolved to convene the 18th annual general meeting (AGM) of the bank on Friday, 15 July 2022. On the back of Yes Bank's turnaround and having achieved significant progress post the implementation of the Yes Bank Reconstruction Scheme March 2020, the board of directors of the bank appointed under the reconstruction scheme, have recommended to its shareholders, the formation of an alternate board in line with the directions of the scheme.

Lupin rose 0.02% to Rs 610 after the drug major announced that it has received tentative approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Ivacaftor tablets, 150 mg. Ivacaftor tablet is a generic equivalent of Kalydeco tablets manufactured by Vertex Pharmaceuticals. These tablets will be manufactured at Lupin's Nagpur facility in India.