RBI Monetary Policy

Indian equity markets are set for a cautious start on Wednesday, with GIFT Nifty pointing to a lower opening for the Sensex and Nifty 50 as investors await the Reserve Bank of India's monetary policy decision later in the day.

The weak opening indication comes after the domestic benchmarks recovered strongly over the previous two sessions. Rising crude oil prices, continued foreign investor selling and uncertainty over the RBI's next interest-rate move are keeping sentiment under pressure.

GIFT Nifty signals weak opening

GIFT Nifty was indicating a decline of around 100 points in early trading, pointing towards a weaker start for India's benchmark indices.

The signal comes after the Nifty 50 gained about 1% on October 6, extending its recovery for a second consecutive session. However, the broader market trend remains under pressure after the index suffered a prolonged decline.

Global cues were mixed. U.S. equities remained relatively strong, with the S&P 500 and Nasdaq reaching record levels, but Asian markets were weaker on Wednesday.

RBI policy decision in focus

The biggest domestic trigger for Wednesday's trading session is the RBI Monetary Policy Committee's decision.

The RBI is expected to announce its policy decision on Wednesday after its three-day meeting. Markets have largely priced in a 25-basis-point increase in the repo rate, which would take the rate above the current 5.25%.

Such a move would represent the first RBI rate hike since February 2023.

A Reuters poll found that nearly 60% of economists expected a 25-basis-point increase, while market instruments have also been reflecting expectations of a hike.

Investors will therefore be watching not only the rate decision but also the RBI's commentary on inflation, liquidity, economic growth and the future policy stance.

Crude oil remains a major risk

Oil prices are another major concern for Indian markets.

Brent crude returned above $101 a barrel, adding to concerns about India's import bill and inflation. Higher crude prices can also put pressure on the rupee and corporate margins.

India's dependence on imported crude makes oil prices particularly important for the domestic economy. A prolonged rise in energy costs could complicate the RBI's inflation-management efforts.

Rupee under pressure

The Indian rupee also remains under pressure ahead of the RBI decision.

The rupee closed at ₹96.42 against the U.S. dollar on October 6, its lowest level in about two months. Foreign equity outflows and higher global bond yields have contributed to the currency's weakness.

The RBI has been using several measures to manage liquidity and support the currency, including foreign-exchange operations and bond-market measures.

FII selling remains a concern

Foreign institutional investor outflows have been one of the biggest challenges for Indian equities in 2026.

Reuters reported that foreign investors had withdrawn around $27.8 billion from Indian equities during 2026, contributing to the market's prolonged weakness.

Higher U.S. Treasury yields have made dollar-denominated assets more attractive, while geopolitical uncertainty and elevated oil prices have further affected investor sentiment.

What investors will watch today

Apart from the RBI decision, traders are likely to track:

• RBI's repo-rate decision and policy stance

• Governor's comments on inflation and growth

• Brent crude prices

• Rupee-dollar movement

• FII and DII activity

• Asian market trends

• Banking and rate-sensitive stocks

The market's immediate reaction could depend heavily on whether the RBI's decision and guidance broadly match what investors have already priced in.

For now, the GIFT Nifty signal suggests a cautious opening, but the direction of the market through the session could be influenced significantly by the RBI's policy announcement and subsequent commentary.