Indian Markets Flat Ahead of RBI Policy, US Shutdown Fears Loom

Indian equity indices Sensex and Nifty 50 are expected to open flat on Wednesday as market participants await the Reserve Bank of India’s monetary policy decision. The Monetary Policy Committee, led by Governor Sanjay Malhotra, is widely anticipated to maintain the current repo rate unchanged and retain its existing policy stance. This cautious approach comes despite the domestic market extending its losing streak to eight straight sessions, with Sensex declining by 97.32 points (0.12%) to close at 80,267.62 and Nifty 50 falling by 23.80 points (0.08%) to settle at 24,611.10 on Tuesday.

The Gift Nifty, often considered an early indicator of market direction, was trading near 24,773, approximately 5 points lower than the previous Nifty futures close, signaling a potentially lackluster start for Indian markets. This extended downturn reflects growing investor caution ahead of the central bank’s policy announcement and concerns about domestic fiscal health, with India’s fiscal deficit reaching 38.1% of the full-year target by the end of August.

While Indian markets struggled, US stock indices posted gains overnight despite persistent worries about a potential government shutdown. The Dow Jones Industrial Average surged by 81.82 points (0.18%) to close at 46,397.89, while the S&P 500 advanced by 27.25 points (0.41%) to end at 6,688.46. The Nasdaq Composite also moved higher, gaining 68.89 points (0.31%) to finish at 22,660.10. These quarterly and monthly gains occurred even as the US moved closer to a government shutdown after the Senate failed to extend funding past the midnight deadline.

Mixed economic data from the United States added complexity to the global market picture. The JOLTS report showed job openings, a key measure of labor demand, rose by 19,000 to 7.227 million as of August-end, slightly exceeding economists’ forecast of 7.185 million. However, hiring slipped by 114,000 to 5.126 million, while layoffs declined by 62,000 to 1.725 million. Meanwhile, US consumer confidence fell more than expected in September, with the Conference Board’s index dropping 3.6 points to 94.2 against economists’ forecast of 96.0, reflecting growing concerns about job availability.

Asian markets presented a mixed picture, while Japan’s manufacturing activity contracted at the sharpest pace in six months in September. The S&P Global Japan Manufacturing PMI fell to 48.5 from 49.7 in August, marking the steepest deterioration since March and staying close to the flash estimate of 48.4, indicating ongoing challenges in the region’s industrial sector.

Gold prices maintained their appeal as a safe-haven asset, trading close to record highs amid growing economic uncertainties. Spot gold was trading 0.2% higher at $3,861.22 per ounce, while US gold futures increased by 0.4% to $3,888.80. This strength in precious metals reflects investor concerns about multiple risk factors, including the potential US government shutdown and mixed global economic indicators.

Domestic fiscal concerns also weighed on market sentiment, with India’s fiscal deficit reaching Rs 5,98,153 crore during April-August 2025-26, representing 38.1% of the full-year target. The Centre projects the fiscal deficit for FY26 at 4.4% of GDP, or Rs 15.69 lakh crore, creating additional scrutiny for policymakers and market participants alike as they assess the broader economic landscape.