The key equity indices reversed gains and traded with modest losses in the afternoon trade. The Nifty once again slipped below the 16,400 level after hitting the day's high of 16,514.30 in mid-morning trade. Shares of realty, media and PSU banks were in the green while FMCG, consumer durables and oil & gas stocks corrected. Shares turned volatile after the RBI announced a hike in the key repo rate by 50 basis points to 4.90%. At 13:25 IST, the barometer index, the S&P BSE Sensex, was down 128.77 points or 0.23% to 54,978.57. The Nifty 50 index fell 41.20 points or 0.25% to 16,375.15. In the broader market, the S&P BSE Mid-Cap index rose 0.07% while the S&P BSE Small-Cap index shed 0.06%.

The market breadth was positive. On the BSE, 1,689 shares rose and 1,503 shares fell. A total of 149 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.

Gainers & Losers:

State Bank of India (SBI) (up 2.06%), Bajaj Finance (up 1.70%), Tata Steel (up 1.56%), Hero Motocorp (up 1.47%) and Titan Company (up 1.32%) were major Nifty gainers.

Reliance Industries (down 1.26%), Bharti Airtel (down 1.07%) and ITC (down 0.82%), Bajaj Auto (down 0.66%) and Britania Industries (down 0.64%) were majority Nifty losers.

Stocks in Spotlight:

Adani Power fell 1.79% to Rs 286. The company on Tuesday announced that it signed share purchase agreements to acquire 100% equity shares of two infrastructure development companies, Support Properties (SPPL) and Eternus Real Estate (EREPL). The total cash consideration to acquire SPPL is Rs 280.10 crore, while EREPL will be acquired at an aggregate equity value of Rs 329.30 crore. The company said that the transaction is expected to be completed in two weeks.

PB Fintech rose 0.08% after the founder, chairman and CEO Yashish Dahiya sold 37,69,471 equity shares in the company via open market transactions on 7 June 2022. These shares were sold at an average price of Rs 610.24 per share.

PNB rose 0.64% after the board of Punjab National Bank (PNB) approved the bank's participation in the proposed rights issue of PNB Housing Finance (PNBHFL) for an amount upto Rs 500 crore, in order to retain bank's shareholding at 30% or below but above 26%, and to retain its status as promoter.

Hindustan Oil Exploration Company (HOEC) surged 12.07% after the company announced the commencement of oil production and gas sales from Block B-80. Block B-80 is spread over a 56 square kilometer area in Western Offshore and was awarded under the first discovered small field (DSF) bid round 2016 on 27 March 2017.

Global Markets:

European stocks fell across the board while most Asian shares advanced on Wednesday. Japan's economy shrank an annualized 0.5% in the first quarter, revised government data showed Wednesday.

International markets have pulled back this week amid nervousness over forthcoming U.S. data releases this week, including the latest inflation reading on Friday.

The World Bank on Tuesday cut its global growth forecast to 2.9% for 2022 and warned of the world economy slipping into a period of stagflation reminiscent of the 1970s.

In the commodities market, Brent crude for August 2022 settlement was up 69 cents or 0.57% at $ 121.26 a barrel.