Nifty 50 Index patterns point to more gains ahead of RBI rate cut

The Nifty 50 Index has wavered in the past few weeks as investors book profits following the recent surge. It jumped to ₹25,110 in May, up by over 15% from its lowest point in April as concerns about tariffs eased. This article explains what to expect from the Reserve Bank of India (RBI) and the year's top movers.

RBI interest rate decision ahead

The main catalyst for the Nifty 50 Index this week will be the RBI interest rate decision on Friday. 

Economists believe that the central bank will continue with its interest rate cuts in this meeting. Most see it cut by 0.25% in this meeting, although some analysts anticipate a jumbo cut. 

If this happens, it will be the third consecutive time that the bank has slashed rates this year. A 0.25% rate cut will bring interest rates to 6.25%. 

Analysts believe that the bank has more room to cut interest rates now that the economy is slowing. Recent data showed that the Indian economy slowed to 6.5% in the last financial year, down from 9.2% a year earlier. In a note, an analyst from the Bank of Baroda said: 

“We do believe that given the rather benign inflation conditions and the liquidity situation, which has been made very comfortable through various measures of RBI, the MPC would go in for a 25bps cut in the repo rate.”

The rising hopes for a RBI rate cut explain why Indian bond yields have plunged this year. The ten-year yield has plunged to 6.20% from the year-to-date high of 6.86%, while the 30-year has dropped to 6.76% from 7.161%. 

Bond yields often have an inverse correlation with the stock market. In most cases, falling yields push investors to the stock market, where they may earn more returns, and vice versa.

Top Indian stock movers

The most active Nifty 50 Index stock was Adani Enterprises, which dropped after a report emerged that the Justice Department was investigating it for dealing with Iranian Liquified Petroleum (LPG) products.

This will be the second major investigation that the US government has launched against the company. It also means that Gautam Adani’s strategy to have the Trump administration end its lawsuit against his company are not working.

Still, it is unclear what the implications of these lawsuits will be on the company. For many firms, it would be ending of access to the US market, a place where Adani Enterprises is not involved. It may also be sanctioned or fined. 

The top-performing Nifty 50 index companies this year are the likes of Bharat Electronics, Bajaj Finance, SBI Life Insurance, HDFC, and Tata Consumer Products. All these stocks have jumped by over 23% this year. 

On the other hand, the top laggards are firms like Trent, Wipro, Infosys, Tata Consultancy, and IndusInd Bank. 

Nifty 50 Index technical analysis

The daily chart shows that the Nifty 50 Index bottomed at ₹21,745 on April 7 this year as Donald Trump’s tariffs roiled the market. It then formed a golden cross on May 2 as the 50-day and 200-day moving averages crossed each other. 

The index is now in the process of forming a bullish pennant pattern, which happens when there is a vertical line and a symmetrical triangle. In most cases, this pattern usually leads to a strong bullish breakout. 

Therefore, the index will likely continue rising as bulls target the next key resistance level at ₹26,280, up by 6.3% from the current level. A drop below the 50-day moving average at ₹23,690 will invalidate the bullish outlook.