Smallcap, midcap stocks dip; here's why broader markets are down

Stock Market today: Broader markets witnessed a decline on Wednesday after Reserve Bank of India (RBI) governor Sanjay Malhotra's rate pause decision failed to impress D-street investors. The RBI MPC maintained the repo rate at 5.5 per cent and retained a 'neutral' policy stance.

At 10:40 AM, Nifty Midcap 100 was trading at 56,688.75, down by 0.91 per cent. Eighty-seven of the index’s 100 constituents were trading in red. Coforge, BHEL, Prestige Estates, Bharti Hexacom and Housing and Urban Development Corp. (Hudco) were among the top laggards from Nifty Midcap. The index hit an intraday low of 56,483.75, shedding more than 700 points.

Nifty Smallcap 100 experienced a sharper drop, down by 1.07 per cent, quoting 17,674. The index hit an intraday low of 17,587.65 level, down by 276 points and was dragged by Redington, Reliance Power, Kaynes tech, PG Electroplast and Piramal Pharma. Ninety constituents from the index were trading in red, with only 10 trading in green. Meanwhile, BSE Sensex was trading at 80,526.68 level, down by 184 points or 0.23 per cent. Whereas, Nifty50 was trading at 24,570.35 level, down by 79 points or 0.32 per cent.

All sectoral indices were trading in red as investor sentiment remained jittery post the RBI's interest rate decision. Nifty Realty was the worst-performing index, down by 2.34 per cent, trading at 886 level. Nifty IT followed suit and was down by 1.53 per cent, trading at 34,497 level. Meanwhile, Nifty Bank was down by just 0.16 per cent, quoting 55,270 level.  Track Stock Market LIVE Updates

Here's why broader markets are trading lower today:

RBI pulls breaks

Despite the RBI’s rate pause decision being largely in line with D-Street expectations, broader markets were trading in the red. Analysts noted that the central bank’s move was more of a non-event for the markets, with uncertainty surrounding tariffs having a greater impact on investor sentiment. On top of this, the GDP growth projection for FY26 now stands at 6.5 per cent, slightly lower than the previous estimate of 6.7 per cent.

"(RBI's rate stance) This cautious approach reflects concerns over global trade uncertainties, particularly the US's 25 per cent tariffs on Indian exports. This policy decision is largely a non-event for markets, which are now expected to shift focus to U.S. tariff impacts, upcoming U.S. economic data, and foreign institutional investor (FII) flows," said Santosh Meena, head of research at Swastika Investmart.

Trump tariff Uncertainty

Besides the RBI's rate pause decision, what is adding to the D-street's nervous sentiment is Trump's recent comments on a tariff hike. The US president has threatened the imposition of "substantially" high tariff rates on Indian imports in the next 24 hours. “India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits. They don’t care how many people in Ukraine are being killed by the Russian War Machine. Because of this, I will be substantially raising the Tariff paid by India to the USA,” Trump wrote in a social media post.

This has further impacted the overall market mood as India, in a worst-case scenario, might face a higher tariff rate as compared to its peer nations, incase a trade deal is not reached between both nations.

Inflation risk still looms

While inflation levels are well below the central bank's target, Malhotra pointed out that upside risk still lingers owing to geopolitical uncertainty playing in the background, coupled with uneven weather patterns. Moving forward, D-street analysts believe that the RBI's tone will likely remain cautious.

"The central bank has rightly highlighted the upside risks to inflation from global crude prices, erratic monsoons, and supply-side uncertainties, even as the domestic macro backdrop remains resilient. With core inflation moderating and economic activity holding up—evident from robust GST collections, credit growth and PMI readings—the RBI is likely to remain data-dependent and cautious," said Sonam Srivastava, founder and fund manager at Wright Research PMS.