Benchmark indices trade flat as RBI maintains status quo

Benchmark indices were trading flat in the afternoon on Friday.

Market, which opened on a flat note ahead of the RBI announcement, fluctuated between gains and losses in the first half as the RBI Monetary Policy Committee maintained the status quo on key policy rates. In addition, negative global cues further impacted the market.

At 1 pm, the BSE Sensex was at 52,184.31, down 48.12 points or 0.09 per cent. It hit an intra-day high of 52,389.02 and a low of 52,055.40. The Nifty 50 was at 15,688.90, down 1.45 points or 0.01 per cent. It recorded yet another all-time high of 15,733.60. It hit an intra-day low of 15,642.55.

Grasim, Coal India, ONGC, L&T and IOC were the top gainers on the Nifty 50 while Nestle India, Titan, Hindalco, Hindustan Unilever and HDFC Bank were the top laggards.

Likhita Chepa, Senior Research Analyst, CapitalVia Global Research, said, “After the Reserve Bank of India's (RBI) Monetary Policy Committee kept policy rates steady at its bi-monthly review, Indian equities benchmarks managed to keep their heads in the green in the morning session. The central bank's policy stance has remained accommodative in an effort to keep liquidity in the economy as the country recovers from the covid-19 outbreak and its economic consequences.”

"If the Nifty index is unable to sustain the level of 15650, we will see a small correction in the market till the levels of 15500,” added Chepa.

RBI Policy

RBI has announced its decision to keep the policy repo rate unchanged at 4 per cent while the reverse repo rate is at 3.35 per cent.

Rate sensitive stocks were trading mixed post the announcement, auto and realty tracking gains while financials remained under pressure.

Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities, said, “The announcements on policy rates, stance, and liquidity management was as per expected. The announcements on GSAP 1.0 and GSAP 2.0 are in line with expectations too. Markets could be slightly disappointed with the last tranche of GSAP 1.0 including SDL within the Rs400 bn limit, especially, after the announcement of a possible Rs1.58 trillion borrowing by the centre as back-to-back loans to the states.”

“GDP growth estimate for FY2022 was revised down to 9.5%, again broadly in line with consensus estimates. We expect GDP growth at 9%. Estimate for average inflation was marginally revised higher to 5.1%. We estimate average CPI inflation at 4.9%. It remains well within the RBI’s comfort levels given the growth concerns. Overall, policy decisions were as expected and we expect the RBI to remain steady with its policy rate, stance, and liquidity management over at least the next couple of policy meetings,” added Rakshit.

It has also decided to open an “On-tap Liquidity Window for Contact-intensive Sectors” aggregating ₹15,000 crore till March 31, 2022. These sectors include hotels and restaurants, tourism, rent-a-car service providers.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "On tap liquidity window for contact intensive sectors is an unconventional measure to mitigate the sufferings of segments like hotels, restaurants, tourism, bus operators, beauty parlours, saloons etc. Upward revision of inflation rate will raise bond yields marginally in the short run."

Sectoral and broader indices

Financial and FMCG were under pressure on the sectoral front while auto, metal and PSU Bank stocks gained. 

Nifty Auto was up 0.43 per cent, while Nifty Metal was up 0.63 per cent. Nifty PSU Bank was up 0.47 per cent. 

Meanwhile, Nifty Bank was down 0.66 per cent while Nifty Private Bank was down 0.60 per cent. Nifty FMCG was down 0.26 per cent. 

The broader indices remained in the green as midcap and smallcap stocks continued to retain gains.

Nifty Midcap 50 was up 0.48 per cent, while Nifty Smallcap 50 was up 0.74 per cent. The S&P BSE Midcap was up 0.45 per cent, while the S&P BSE Smallcap was up 0.76 per cent. 

Notably, the volatility index rose 1.27 per cent but remained under 16 at 15.95.

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