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Markets rebounded sharply on Wednesday on the back of the Reserve Bank of India’s decision to keep rates unchanged and maintain its accommodative stance to support growth.
Benchmark indices, though off the day’s high, extended gains in the second half-- led by banking and financials. Midcap and smallcap stocks too witnessed strong buying.
The BSE Sensex closed at 49,661.76, up 460.37 points or 0.94 per cent. It hit an intraday high of 49,900.13 and a low of 49,093.90. The Nifty 50, after briefly slipping to an intraday low of 14,649.85, remained above the 14,800-mark, closing at 14,819.05, up 135.55 points or 0.92 per cent. It hit an intraday high of 14,879.80.
As many as 1,837 shares have advanced on the BSE, 1,111 declined, and 184 remain unchanged. The number of scrips that hit a 52-week high was 180 as against 40 that were at a 52-week low; 317 securities hit the upper circuit as compared to 220 that hit the lower circuit.
G-Sec buying - a booster
Vinod Nair, Head of Research at Geojit Financial Services, said: "Indian market is invigorated by RBI’s long-term dovish stance to maintain an easy money policy till the economy reverts to normalcy. A big cheer is the GSec buying program of Rs.1 lakh crore to ensure liquidity and flatten the long-term yields curve. RBI’s decision to maintain its high GDP growth forecast also helped the market to calm down its fears which had increased post the second wave infection and stringent lockdowns."
JSW Steel, Wipro, State Bank of India, IndusInd Bank and SBI Life were the top gainers on the Nifty 50 while Adani Ports, Tata Consumer, UPL, Titan and NTPC were the top laggards.
Binod Modi, Head Strategy at Reliance Securities, said, “Domestic equities rebounded sharply today after favourable outcome from RBI’s policy meeting. RBI sounded more dovish this time and showed its strong commitments once again towards sustaining economic momentum by way of ensuring proper liquidity in the system through various tools. Further, its forecast towards inflation and growth remains mostly unchanged despite recent surge in freight cost and input prices.”
The RBI has estimated inflation at 5.2 per cent in Q1 and Q2 of FY22; 4.4 per cent in Q3 and 5.1 per cent in Q4.
Furthermore, the growth projections by the International Monetary Fund too also helped markets across Asia. For India, IMF has predicted a growth of 12.5 per cent for 2021 and 8 per cent for 2022.
Bank stocks jump
Among the sectoral indices, all indices closed in the green, led by banking, financials and auto stocks. The Nifty PSU Bank recorded the highest gains and was up 1.95 per cent at closing while Nifty Bank was up 1.51 per cent. The Nifty Financial Services and Nifty Auto were up 1.19 per cent and 1.59 per cent, respectively.
SBI, ICICI Bank, IndusInd Bank, Bajaj Finance, Axis Bank and Kotak Mahindra Bank scored handsome gains in the range of 1.2-2.5 per cent.
Broader indices outperform
As for the broader indices closed in the green. Midcap and smallcap stocks outperformed benchmark indices.
The Nifty Midcap 50 was up 1.35 per cent while the Nifty Smallcap 50 was up 1.51 per cent at closing. The S&P BSE MidCap was up 0.82 per cent while the S&P BSE SmallCap was up 1.30 per cent.
“All key sectoral indices traded in green with sharp recovery in Financials supported benchmark indices. Additionally, strong buying in midcap and smallcap stocks remained visible,” said Modi.
However, the volatility index was down 2.84 per cent.
Covid risk in near term
However, analysts remain cautious owing to a sharp rise in Covid-19 cases, owing to which the market is likely to remain volatile in the near term.
“Given sharp rise in Coronavirus cases in the country and resultant mobility restrictions in several states, domestic equities are expected to remain volatile in the near term. While we believe that weekend lockdowns and night curfews are unlikely to create any major issue with regards to supply chain and demand disruption in the near term, prolonged restrictions and more states taking such measures may create some disruption in coming months,” said Modi.
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