Indian Stock Market Declines as RBI Raises Repo Rate by 25 Basis Points

The Indian stock market opened in negative territory on 7 October 2026, with the Bombay Stock Exchange (BSE) Sensex dropping by more than 500 points in early trading. The increase in the Reserve Bank of India’s (RBI) repo rate by 25 basis points has contributed to this downturn.

Most stocks on the Sensex faced losses, with Titan experiencing the steepest decline at 4.33%, bringing its share price down to ₹4,343.50. Other notable losers included Asian Paints, which decreased by 1.71% to ₹2,378.65, and Maruti, down by 1.45% to ₹11,435. Other companies such as Bharat Electronics Limited, Tata Steel, Mahindra & Mahindra, Infosys, and Trent also saw declines of over 1%.

Conversely, Bharti Airtel and Bajaj Finance were among the few gainers, rising by 0.75% and 0.69%, respectively. Other companies like Kotak Mahindra Bank and Sun Pharmaceutical were marginally lower, while major stocks including NTPC, ICICI Bank, Power Grid, and Adani Ports also traded in the red.

Market analysts had anticipated the RBI's decision to hike rates due to ongoing inflationary pressures, driven partly by geopolitical tensions in the Middle East affecting global oil prices. The RBI’s Governor Sanjay Malhotra had indicated the necessity for this rate adjustment as stakeholders remain attentive to inflation trends.

According to a report from Goldman Sachs, the Monetary Policy Committee could transition its approach from a neutral stance to a calibrated tightening, with the current environment signalling potential for further adjustments. Following a pause on rate changes since February 2023, the market's response has seen the Nifty 50 index decrease by 7.5% amid higher oil prices and rising U.S. Treasury yields.

Geojit Investments noted that the rate hike is nearly inevitable given the rising inflation and bond yields and could impact rate-sensitive sectors significantly. JM Financial commented that such rate increases might exert pressure on non-bank lenders' margins, although floating-rate housing financiers may be in a relatively stronger position.

In commodities trading, oil prices have risen due to concerns over potential supply disruptions caused by storms approaching U.S oil-producing areas, coupled with rising tensions between Saudi Arabia and Iran-backed factions in Yemen. Brent crude futures increased by 0.92% to $101.51 per barrel, while the West Texas Intermediate crude climbed to $90.25, also up by 0.92%. The storm, predicted to become the first Atlantic hurricane of the year, has the potential to disrupt oil and gas production in the Gulf of Mexico, an area that represents a significant portion of U.S. crude and natural gas output.

Traders are now closely monitoring the rupee’s performance, which is expected to open between ₹96.44 and ₹96.46 against the dollar. The previous session saw the currency settle at ₹96.42. A recent Reuters poll indicated that 35 out of 61 economists forecast a 25-basis-point repo rate increase, while 26 expected no change. The swap markets had already factored in the increase, leaving room for speculation about possibly larger moves.

In the previous trading session, Indian indices had experienced a significant rebound, with the Sensex climbing by 685.34 points, or 0.95%, to close at 73,067.81, and the Nifty surging by 220.35 points, or 0.98%, ending at 22,776.10. This rise was driven by positive investor sentiment spurred by a drop in crude oil prices below the $100 mark, coupled with robust purchasing activity in banking stocks and Reliance Industries.

Technical analysts suggest a cautious outlook as the market reacts to the RBI’s policy announcement. The Sensex is anticipated to face resistance at key levels around 73,400, while continued buying could strengthen recovery should it maintain levels above 73,000. The Nifty 50 is similarly viewed, with support at 22,600 indicating that bullish sentiment may persist if the index remains above this threshold. Should these levels falter, analysts suggest that market consolidation may occur.

The global backdrop saw record highs for several Wall Street indices, with the Dow Jones Industrial Average rising 253.14 points to 51,521.04, while the S&P 500 and the Nasdaq continued their upward trajectory. Asian markets, however, opened lower as caution remained regarding U.S. Treasury yields and regional economic signals ahead of the RBI's decision.