The benchmark indices were trading higher in the afternoon session on Friday, after opening on a firm note amid positive global cues.
However, the indices, which faced some volatility in the first half, recovered to trade higher on the back of buying activity across multiple counters. RBI’s accommodative stance and its decision to keep repo rates unchanged capped the downside.
At 1:01 pm, the BSE Sensex was trading at 59,193.09, up 158.14 points or 0.27 per cent. It recorded an intraday high of 59,345.70 and a low of 58,876.36. The Nifty 50 was trading at 17,706.30, up 66.75 points or 0.38 per cent. It recorded an intraday high of 17,750.90 and a low of 17,600.55.
Grasim, JSW Steel, SBI Life, Adani Ports and Coal India were the top gainers on the Nifty 50, while Cipla, Tech Mahindra, Maruti, NTPC and Sun Pharma were the top losers.
The volatility index softened 5.46 per cent to 17.96.
RBI maintains accommodative stance
The six-member monetary policy committee (MPC) unanimously decided to keep the repo rate unchanged at 4 per cent as economic growth is barely above the pre-pandemic level. It also voted unanimously to keep the monetary policy stance accommodative, while focussing on withdrawal of accommodation to keep inflation within the target.
Naveen Kulkarni, Chief Investment Officer, Axis Securities said, “The markets cheered RBI’s first monetary policy for the calendar year as it kept key policy rates unchanged and continued with its accommodative stance. RBI’s continuation of policy support is decoupled from that of global central banks, which are adopting policy normalisation, citing heightened inflationary pressure.”
However, RBI marked down its earlier real GDP growth projection for FY23 to 7.2 per cent from 7.8 per cent, assuming crude oil prices at $100 per barrel. The retail inflation projection for FY23 has been raised to 5.7 per cent, from the earlier projection of 4.5 per cent, assuming a normal monsoon and the average price of crude oil at $100 per barrel.
As part of its plan to normalise the liquidity corridor, RBI will introduce a standing deposit facility at 3.75 per cent. It will be the floor of the corridor
“RBI’s priority on the growth front is not unwarranted given that on-ground economic recovery has yet to gather momentum and private consumption lags pre-pandemic levels. We believe over the medium term, policy rates are likely to gradually harden, and markets will continue to gauge the impact of global policy changes. We expect today’s policy action to continue benefiting interest rate sensitive sectors such as housing, real estate and banking,” Kulkarni said.
Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers said, “The 40 bps hike in the reverse repo rate was ahead of consensus expectations. The downward revision of the GDP growth rate and upward revision of retail inflation was expected. The RBI is now anticipating a much faster rise in inflation than earlier. The monetary policy stance, however, remains accommodative by normal standards.”
“With today’s measures, RBI has moved to the path of a gradual increase of the policy interest rate and phased withdrawal of liquidity. From a medium-term perspective, the measures are supportive of growth, price stability and orderly development in the financial markets,” said Hajra.
Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research said, “The first MPC meeting of FY23 has started on an important note, with RBI providing clear signals on the exit from accommodative monetary policy in the near future, while retaining the accommodative stance for now, along with a status quo on the repo rate.”
“Acuité believes that RBI has finally bitten the bullet and provided increased clarity on its monetary stance going forward. The increase in the repo rate and the change in stance from accommodative to neutral can happen as early as June 22 depending on inflation and the growth data. In our opinion, the market can brace for a 50 bps repo rate hike for the current financial year,” added Chowdhury.
Pharma, realty, IT under pressure
On the sectoral front, all indices except Nifty Pharma, Nifty IT and Nifty Realty were in the green. Metals, FMCG, consumer durables and oil & gas gained focus.
Nifty Pharma, Nifty IT and Nifty Realty were trading flat.
Meanwhile, Nifty Metal was up nearly 2 per cent. Nifty FMCG and Nifty Oil & Gas were up over 1 per cent each, while Nifty Consumer Durables was up nearly 1 per cent.
The broader indices were in the green.
The Nifty Midcap 50 was up 0.70 per cent, while the Nifty Smallcap 50 was up 0.23 per cent. The S&P BSE Midcap was up 0.80 per cent, while the S&P BSE Smallcap was up 0.77 per cent.