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Indian markets fell around half a percent each on Thursday after the RBI left its benchmark interest rates unchanged. Today, markets are likely to get flat-to-negative start amid mixed cues from the global markets. Investors are likely to remain on sidelines ahead of Index of Industrial Production (IIP) data to be out later in the day. Besides, concerns over high inflation and 10 per cent incremental CRR from August 12 onwards for banks, weigh on the investors' sentiment. Traders will be concerned with private report that India's headline retail inflation is expected to have crashed past the upper bound of the Reserve Bank of India's (RBI) 2-6 percent tolerance band in July on its way to a nine-month high due to a surge in vegetable prices. However, some support will come as finance minister Nirmala Sitharaman said while the global economy is struggling, India is uniquely positioned to be optimistic and positive about its future growth. The minister highlighted that India is the fastest-growing economy despite disruptions due to the pandemic. Meanwhile, Reserve Bank Governor Shaktikanta Das has said the move to impose a 10 per cent incremental cash reserve ratio for a limited period will help suck out Rs 1 lakh crore of excess liquidity from the system. The move, announced along with the bi-monthly policy review, was the best option under the current circumstances and there is enough liquidity in the system for the banks to continue their lending operations. Moreover, Capital markets regulator Sebi has proposed to increase the threshold to at least Rs 500 crore from the current Rs 100 crore for the outstanding long-term borrowings for identifying any entity as Large Corporates (LC).

The US markets ended higher on Thursday after the Labor Department released a report showing the annual rate of consumer price inflation accelerated by slightly less than expected in the month of July. Asian markets are trading mixed on Friday on the back of a retreat in U.S. bond yields and the dollar index.

Back home, Indian equity benchmarks remained volatile on the weekly expiry day and lost nearly half a percent on Thursday as investors remained on the sidelines ahead of the US inflation data announcement. Key gauges made a negative start and stayed in red for whole day, amid the Reserve Bank of India’s monetary policy decision, weak global cues, and weekly F&O expiry. The Reserve Bank of India (RBI) has decided to keep policy rate unchanged for third time in a row as it maintains heightened vigil on inflation. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022. It also directed banks to maintain incremental cash reserve ratio (ICRR) at 10 per cent, August 12 onwards, in order to reduce liquidity from the system. Besides, it increased FY24 inflation forecast to 5.4 per cent from 5.1 per cent, discounting near-term risks. Weakness continued over the Dalal Street in late afternoon deals as traders also remained cautious with a private report that the rate of price rise for the consumer basket likely breached the central bank's upper tolerance level of 6 per cent in July. Traders paid no heed towards data showing that Foreign Institutional Investors (FIIs) turned buyers on Wednesday after continuous offloading of equities for the past several days. They bought equities worth Rs 644.11 crore on Wednesday. Traders also overlooked Securities and Exchange Board of India’s (SEBI) annual report for the financial year 2022-23 revealing that over 400 new foreign portfolio investors (FPIs) joined the Indian markets in the last financial year. According to the data, the number of FPIs operating in India increased to 11,081 from 10,608 in FY22. Finally, the BSE Sensex fell 307.63 points or 0.47% to 65,688.18 and the CNX Nifty was down by 89.45 points or 0.46% to 19,543.10.

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