RBI Policy Decision Day! Indian Markets Brace for Rate Call Amidst Global Jitters, Rupee Rebounds & India-Russia Summit Focus!

Indian markets commenced Friday's trading session with a cautious tone, as investors closely monitor global economic signals and await the Reserve Bank of India's (RBI) monetary policy announcement. The Gift Nifty opened slightly lower, reflecting an underlying apprehension among market participants.

RBI Policy Decision Ahead

• The Reserve Bank of India's Monetary Policy Committee (MPC) is set to announce its interest rate decision today, concluding its three-day meeting.
• The benchmark repo rate has remained steady at 5.5% for the past four consecutive meetings.
• Market sentiment is divided: a Financial Express poll indicates that while many analysts anticipate the RBI will keep rates unchanged, a significant portion expects a 25-basis-point cut.

Global Market Snapshot

• Asia-Pacific markets started the day on a weak note. Japan's Nikkei 225 saw a decline of 1.36%, and the Topix slipped by 1.12%.
• South Korea's Kospi remained nearly flat, while the Kosdaq fell by 0.25%.
• Australia's S&P/ASX 200 also edged down by 0.17%.
• U.S. markets on Thursday ended mixed. The S&P 500 and Nasdaq Composite saw modest gains, while the Dow Jones Industrial Average registered a slight dip.

Rupee and Commodity Trends

• The Indian rupee showed resilience, recovering from its lifetime lows against the US dollar, trading below the 90/$ mark.
• Market participants will closely watch the RBI's commentary on the rupee's outlook and future trajectory, with many brokerages forecasting a comeback in 2026.
• Crude oil prices were largely flat in early trading on Friday. West Texas Intermediate (WTI) hovered around $59.64 a barrel, and Brent crude was around $63.25 a barrel.
• Gold prices in India edged higher, with February 5, 2026 gold futures on the MCX trading slightly down, while international gold prices remained robust.

Foreign Investment Activity

• Foreign Institutional Investors (FIIs) were net sellers in the Indian equity market on December 4, withdrawing approximately Rs 1,944 crore.
• In contrast, Domestic Institutional Investors (DIIs) stepped in, purchasing shares worth roughly Rs 3,661 crore, according to preliminary exchange data.

India-Russia Summit Significance

• Prime Minister Narendra Modi met with Russian President Vladimir Putin in New Delhi for the 23rd India-Russia Annual Summit.
• This visit marks Putin's first trip to India in over four years and his first since the conflict in Ukraine began.
• Discussions are expected to center on strengthening defense cooperation, bilateral trade, and energy ties between the two nations.

Sector Performance Highlights

• The previous trading session saw modest gains across several sectors, with Information Technology leading the surge, up 1.24%.
• Aquaculture, Plastics, and the Digital sector also registered positive movements, gaining 1.19%, 0.99%, and 0.98% respectively.

Impact

• The RBI's monetary policy decision is a key determinant of market sentiment and liquidity conditions in India. Any deviation from expectations could trigger significant market movements.
• The recovery of the Indian rupee is crucial for managing import costs and inflation.
• The ongoing India-Russia summit could influence geopolitical relations and pave the way for new trade and defense agreements, impacting specific sectors.
• Global market weakness might continue to weigh on investor sentiment, leading to volatility.

Difficult Terms Explained

• Repo Rate: The interest rate at which the Reserve Bank of India lends money to commercial banks, often used as a tool to control inflation.
• Basis Point: A unit equal to one hundredth of one percent (0.01%). A 25-basis-point cut means a reduction of 0.25% in an interest rate.
• US Dollar Index (DXY): A measure of the value of the U.S. dollar relative to a basket of foreign currencies, comprising the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc.
• WTI Crude Oil: West Texas Intermediate, a specific grade of crude oil used as a benchmark in oil pricing.
• Brent Crude Oil: A major global oil benchmark, extracted from oil fields in the North Sea, used to price two-thirds of the world's internationally traded crude oil supply.
• FIIs (Foreign Institutional Investors): Investors from foreign countries who invest in a country's securities and capital markets.
• DIIs (Domestic Institutional Investors): Institutional investors based in India, such as mutual funds, insurance companies, and public financial institutions, that invest in Indian securities.