Domestic equity benchmark indices kept their opening session losses intact throughout the session and settled lower on Tuesday, as the overall sentiments still remain cautious amongst investors as they are worried about inflation and benchmark interest rates.
Sensex closed the day at 55, 107 points, down 1 per cent, whereas Nifty at 16, 416 points, was down 0.9 per cent.
The RBI's stance on the economy and the actual amount of rise in key lending rates would dictate further course of action in the capital markets.
The central bank's Monetary Policy Committee (MPC) review meeting, which is currently underway, will reveal its decision on Wednesday morning.
Though the Reserve Bank of India raising policy rates in the ongoing monetary policy committee meeting is a "no brainer", as said by its Governor Shaktikanta Das in a recent interview, investors, however, await the actual degree of percentage hike before taking fresh positions and future course of action in the financial markets.
"The volatility in the market is forcing investors to stay sidelined ahead of the RBI's policy announcement. The market has factored a hike up to 50 basis points of repo rate and CRR, but any further stricter measures to clamp liquidity due to lingering inflation will have ramifications on the market trend, " said Vinod Nair, Head of Research at Geojit Financial Services.
Given the geopolitical tensions seen on the global front, the Centre has increased its defence expenditure outlay, which augurs well for the defence related stocks, said Ashwin Patil, Senior Research Analyst at LKP Securities, adding that he is positive on defence manufacturer Bharat Electronics.