RBI Policy, New Auction Rule Drag Nifty Below 24,650

Indian equity benchmarks closed lower on Tuesday as traders squared positions ahead of the Reserve Bank of India's monetary policy decision and adjusted to a new closing auction mechanism for futures and options stocks.

The Nifty 50 fell 159 points, or 0.64%, to 24,614.90. The Sensex slipped 210 points to 78,428.95, partially reversing Monday's rally. Volatility climbed. The India VIX hit a one-week high ahead of the weekly Nifty derivatives expiry.

The new closing auction session, introduced Monday by the National Stock Exchange under SEBI guidance, triggered confusion on its first day. The Nifty 50's official closing value jumped nearly 200 points after continuous trading ended, surprising market participants. The NSE issued a clarification Tuesday, saying the session promotes "transparency and fair and robust price discovery." Traders said the gap between cash and futures prices during Monday's close forced intraday position adjustments Tuesday.

Analysts said the auction framework triggered short-term adjustments but expected the impact to fade as participants adapt.

The RBI's Monetary Policy Committee meets Wednesday. All 50 economists surveyed by Reuters expect the repo rate to stay at 5.25%. The focus rests on the central bank's inflation assessment, liquidity stance, and any signal on crude oil and rupee risks. "Market attention will be focused more on the RBI's commentary than on the policy decision itself," a bond trader at a private-sector bank told Reuters.

Crude oil added to the caution. Brent futures rebounded nearly 3% to around $86.20 a barrel after Monday's 5% drop. The recovery revived inflation concerns. Goldman Sachs said it expects Brent to stay in an $80–$90 range until there is either confirmation of a new U.S.-Iran nuclear deal or a significant escalation in attacks.

The biggest single-stock move came from Life Insurance Corporation. The stock plunged 8.7% to a four-month low after the government launched an offer-for-sale of up to 6.5% at a floor price of Rs 382 per share, a steep discount to Monday's close. The OFS opens for non-retail investors Tuesday, retail investors Wednesday.

Fifteen of 16 major sectoral indices ended lower. Financials and IT led the decline. Reliance Industries fell 2.1%, HDFC Bank dropped 1.5%. Among the few gainers, Trent rose 1%, Hindalco added 0.95%.

Broader markets were mixed. Small-cap stocks gained 0.2%. The mid-cap index slipped 0.3%.

The rupee opened at 95.34 against the dollar, up 3 paise, supported by lower oil prices and a weaker dollar. Traders said importer hedging capped further gains.

Government bond yields were flat. The benchmark 6.94% 2036 bond held at 6.8346%. States aim to raise Rs 26,850 crore through bond sales later Tuesday.

The RBI decision is due at 10 a.m. Wednesday. A status quo is priced in. Any hawkish surprise on inflation or a signal that the central bank is preparing to respond to crude price pressures would extend the selloff. A dovish hold, by contrast, would reinforce the view that the RBI is willing to tolerate above-target inflation for growth support, a stance that has kept bond yields anchored and equity valuations stable through the current earnings season.