Benchmark indices closed higher on Thursday, led by metals, IT and bank stocks.

Market opened on a positive note ahead of the outcome of the Reserve Bank of India’s monetary policy committee meeting, amid mixed global cues. Indices gained further during the day after the central bank maintained a dovish stance.

The BSE Sensex which had surpassed the 59,000- mark during the day with an intraday high of 59,060.24, closed at 58,926.03, up 460.06 points or 0.79 per cent. It recorded an intraday low of 58,332.28. The Nifty 50 closed at 17,605.85, up 142.05 points or 0.81 per cent. It recorded an intraday high of 17,639.45 and a low of 17,427.15.

Breadth favours decliners

The market breadth, however, turned in favour of the decliners with 1,776 stocks declining on the BSE against 1,565 that advanced while 107 remained unchanged. Furthermore, 326 stocks hit the lower circuit compared to the 260 stocks that were locked in the upper circuit. Besides, 173 stocks touched a 52-week high level and 31 touched a 52-week low.

S Ranganathan, Head of Research at LKP securities said, “After a quiet start ahead of US inflation data and state elections back home, indices recovered smartly post the accommodative stance of the RBI which held rates status quo.”

“As the volatility index cooled off, Metals led the rally well supported by Real Estate & Mortgage companies in the broader market. Buoyed by a lower inflation forecast going forward, the rally percolated to IT & Financials in afternoon trade,” Ranganathan said.

ONGC, Tata Steel, Infosys, SBI Life and HDFC Bank were the top gainers on the Nifty 50 while Maruti, IOC, Shree Cement, Ultratech Cement and Adani Ports were the top losers. 

RBI maintains dovish stance

The RBI MPC voted by 5-1 majority to continue with the accommodative monetary policy stance, keeing the repo rates unchanged as the outlook for inflation and growth and the uncertainties relating to Omicron spillover warrant continued policy support for durable and broadbased recovery. The repo rate is currently at 4 per cent. The reverse repo rate is at 3.35 per cent.

Parth Nyati, Founder, Tradingo said, “Contrary to many central banks, RBI acts dovish and kept interest rates unchanged with an accommodative stance. There were expectations that RBI may hike the reverse repo rate and may change its stance to neutral from accommodative in tandem with hawkish global central banks amid rising inflation but RBI continued with its existing stance. RBI believes that inflation will peak out soon and there is a need for continuous support to the economy.”

“Generally, it is considered positive for the market but it will be important to see how the market will read it because there could be a risk that RBI will remain behind the curve that may cause inflation in the future however the overall structure looks bullish for Indian market after a recent correction. Rate-sensitive sectors like infra, real estate, auto, and financial may continue to outperform,” said Nyati,

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that a “clear pro-growth stance is desirable at the current juncture.”

“Market has responded positively to the policy as of now with banking stocks exhibiting strength.

However, the short to medium- term trend of the market is likely to be influenced by the inflation data in US expected late tonight,” Dr Vijayakumar said. 

The market had been expecting the reverse rate to be hiked by 20-25 basis points. 

Apart from this, the RBI has projected a conservative real GDP growth of 7.8 per cent in FY23 against the Economic Survey’s projection of 8-8.5 per cent. The central bank has retained the CPI inflation projection at 5.3 per cent for FY22. It projected FY23 CPI inflation at 4.5 per cent .

Amar Ambani, Senior President and Head – Institutional Equities, Yes Securities said, “The status quo has triggered strong rally in sovereign bonds, with benchmarks yields retreating from the recent highs. It clearly conveys that RBI is quite committed to orderly evolution of yields, notwithstanding the headwinds in the form of inflationary pressure, hawkish Fed and a large Indian government borrowing plan for FY23.”

“Its stance is backed by its expectation of easing of price pressures by end of the fourth quarter of FY22. This dovish policy is in line with our view that RBI will support growth and not turn hawkish for as long as it can, considering that the US Fed is looking to taper and raise its rates,” added Ambani.

According to Mohit Ralhan, Managing Partner of TIW Private Capital group, “Till the time inflation remains below RBI’s forecast, the focus will remain on supporting growth. Further, RBI has been proactively managing liquidity through VRRRs and there are no concerns on the liquidity side.”

“Overall, the commentary on economic growth, increasing strength of PSU banks’ balance sheet, financial stability and liquidity is quite positive and RBI has reconfirmed its commitment to protect domestic markets from the impact of global macroeconomic events. The Indian market is expected to respond positively to RBI’s announcements,” added Ralhan.

Auto, PSU Bank drag

On the sectoral front, all indices except Nifty Auto and Nifty PSU Bank closed in the green. Financials, metals, IT and realty recorded higher gains.

Nifty Auto and Nifty PSU Bank, each closed 0.05 per cent lower. 

Meanwhile Nifty Bank, Nifty Financial Services, Nifty IT and Nifty Metal were each up over 1 per cent. Nifty Realty and Nifty Private Bank closed nearly 1 per cent higher.

Broader indices

Broader indices also closed in the green.

Nifty Midcap 50 was up 0.34 per cent while Nifty Smallcap 50 was up 1.02 per cent. The S&P BSE Midcap was up 0.30 per cent while the S&P BSE Smallcap was up 0.04 per cent. 

The volatility index softened 4.55 to 17.71.