Sensex, Nifty trade higher, led by IT stocks, Reliance

Benchmark indices were trading half a per cent higher during the afternoon on Friday, led by IT stocks. Market opened on a positive note amid positive global cues, Indices edged up further in the first half after the Monetary Policy Committee of the Reserve Bank of India chose to maintain a status quo on key rates.

Gains were also sustained by heavyweights such as Reliance. The volatility index softened 2.36 per cent to slip below 16 at 15.77. At 1 pm, the BSE Sensex which had surpassed the 60,000 mark in the first half, recording an intraday high of 60,212.30 was trading at 59,996.36, up 318.53 points or 0.53 per cent. It recorded an intraday low of 59,830.93.

Also read: Nifty call: Sell on rallies with stop-loss at 17,975

The Nifty 50 which nearly missed the 18,000 mark with an intraday high of 17,941.85 was trading at 17,886.25, up 95.90 points or 0.54 per cent. It hit an intraday low of 17,840.35. IT stocks gained further ahead of Q2 FY 2022 results. Tata Consultancy Services will be the first major company to announce Q2 results today.

Wipro, Reliance, Infosys, Tata Motors and Tech Mahindra were the top gainers on the Nifty 50 while Divi’s Lab, Hindustan Unilever, Dr Reddy, NTPC and Shree Cement were the top losers.

The RBI decided to maintain the status co as repo rate stands at 4 per cent and the reverse repo rate at 3.35 per cent. Amidst uneven growth recovery and concerns over a spike in inflation, it also continued with its accommodative stance to support growth.

“The MPC voted unanimously to maintain status-quo about policy repo rate and by a majority of 5:1 to maintain the accommodative stance,” said RBI Governor Shaktikanta Das, who chairs the MPC, adding that the stance remains accommodative to revive and maintain growth.

As per Nilesh Shah, Group President & MD, Kotak Mahindra Asset Management Company, the RBI policy is meant to achieve multiple objectives.

Also read: Sensex rises over 400 points; Nifty tops 17,900

“Keep growth supported, inflationary expectations under check, financial markets stable, liquidity adequate and appropriate, yield curve in shape and ensure smooth passage of government’s borrowing programme. They have reassured the markets that monetarily policy normalisation will be gradual and calibrated,” said Shah.

Churchil Bhatt, EVP Debt Investments, Kotak Mahindra Life Insurance Company Limited said, “The MPC decided to persist with its accommodative policy stance and opted for a ‘resolute pause’ in policy rates to provide support to ‘durable growth’ with a firm footing. While the MPC retained its FY2022 GDP growth forecast at 9.5 per cent, it revised its FY2022 projection lower by 40 bps to 5.3 per cent on the back of lower food inflation.”

“The MPC acknowledged that crude oil and other commodity prices remain a threat to the inflation trajectory, but weak demand should limit the pass-through to output prices. Importantly, on the action front, the RBI signalled the beginning of gradual ‘tapering’ of liquidity by extending VRR auction tenor, a measure widely expected by markets. While the RBI has refrained from committing any GSAP amount to support bond yields, their emphasis on an ‘orderly evolution of yield curve’ should provide comfort to bond markets. We expect 10Y Gsec to trade in 6.20 per cent to 6.40 per cent range in the near term,” added Bhatt.

According to experts, market has reacted well to the announcement as no curveballs were thrown this session. Jimeet Modi, Founder and CEO Samco Group said that RBI’s strategy going forward is likely to be “a classic textbook one” with liquidity management, the first check on their agenda, followed by a hike in reverse repo.

“The liquidity VRRR auction calendar till December is a welcome move which definitely gives further clarity on the liquidity tapering front. If the Fed’s stance in November goes as expected, then December could be the time the RBI finally begins to reduce the gap between the repo and reverse repo rates. In sum and substance, this times policy didn’t throw any curveballs, hence was well received by the market,” said Modi.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “Some initiatives to absorb the surplus liquidity in the system have been well received by the money market which has pushed up the 10-year yield to 6.3 per cent. In brief, no hawkish message from the Central bank: Policy will support growth; inflation will be under control.”

Also read: Markets likely to open steady ahead of RBI meet, TCS result

Rahul Sharma, Co-Founder, Equity99 on RBI’s Policy Announcement said, “We expect the policy will be benefited for market and banks will show good performance also NBFC stocks will perform as RBI has been decided to introduce the Internal Ombudsman Scheme to further strengthening the internal grievance redress mechanism of NBFCs.”

On the sectoral front, IT, auto and metals gained focus as Realty, Pharma and FMCG witnessed profit-booking. Nifty IT was up 2 per cent while Nifty Metal was up 0.61 per cent.Nifty Auto was up 0.57 per cent.

Meanwhile, Nifty Realty was down 2.80 per cent. Nifty Pharma and Nifty Healthcare Index were down 0.45 per cent and 0.46 per cent. Nifty FMCG and Nifty Consumer Durables were down 0.46 per cent and 0.27 per cent. PSU Bank stocks also dragged with Nifty PSU Bank down 0.47 per cent.

Broader indices were also in the green. Nifty Midcap 50 was up 0.35 per cent while Nifty Smallcap 50 was up 0.83 per cent. The S&P BSE Midcap was up 0.12 per cent while the S&P BSE Smallcap was up 0.63 per cent.

COMMENT NOW