The market registered moderate gains in yet another volatile week ended June 9, amid mixed cues including inline policy outcome with a cautious approach about inflation by RBI, less participation by foreign investors- and surprising rate hike by Australia and Canada's central banks which led to uncertainty over upcoming US Fed meeting next week.
BSE Sensex gained 78.52 points to end at 62,625.63, and Nifty50 was up 29.3 points to close at 18,563.40.
In this week, BSE Large-cap index ended flat, BSE Mid-cap index added nearly 1 percent and Small-cap index gained 1.6 percent.
RBI Policy
As expected, the Reserve Bank of India's Monetary Policy Committee (MPC) retained the repo rate, the key short-term lending rate, at 6.5 percent and also stuck to the “withdrawal-of-accommodation” stance.
The central bank maintained its GDP growth projection for the fiscal year 2023-24 at 6.5 percent while making a slight downward revision to its inflation forecast for 2023-24, lowering it by 10 basis points to 5.1 percent but still above its target of 4 percent.
A slightly downward revision to its inflation forecast for 2023-24, lowering it by 10 basis points to 5.1 percent.
“The domestic market had a positive start to the week, buoyed by favourable indicators such as stronger-than-expected PMI figures, sequential growth in auto sales, and robust expansion in bank credit. These factors instilled confidence in investors regarding India's growth prospects. There was also optimism surrounding the anticipation of a positive revision in the RBI’s inflation forecast during the MPC, considering the recent easing of inflation. However, market sentiment was dampened as the RBI opted for a cautious approach by refraining from a significant cut in the inflation forecast,” said Vinod Nair, Head of Research at Geojit Financial Services.
“The central bank cited concerns over geopolitical uncertainties, the potential impact of El Nino, and the rise in the minimum support price while reaffirming their commitment to bringing down inflation to near the targeted 4 percent.”
“Market participants are now eagerly awaiting the release of domestic inflation data for May, which is anticipated to show a cooling down from the current level of 4.7 percent. Global cues will also play a significant role in shaping the market trend, with investors closely monitoring the outcomes of the FOMC meeting and the US inflation print2,” he added.
Among sectors, Nifty Capital Goods index rose 5 percent, Power index rose 3.3 percent and Auto index up 1.5 percent. On the other hand, Information Technology index down 2.5 percent and FMCG index shed 1 percent.
The BSE Small-cap index added 1.6 percent led by Greenlam Industries, EKI Energy Services, Suzlon Energy, Indian Hume Pipe Company, CarTrade Tech, HBL Power Systems, Mazagon Dock Shipbuilders and Heubach Colorants India.
On the other hand, Indian Energy Exchange, Bhansali Engineering Polymers, Sintex Plastics Technology, Nureca and Bank of Maharashtra shed 10-20 percent.
Foreign institutional investors (FIIs) bought equities worth Rs 970.73 crore, while domestic institutional investors (DIIs) bought equities worth Rs 1,939.76 crore.
Where is Nifty50 headed?
Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities
Indian markets may remain volatile in the near term, the focus will now shift to next week's US FOMC meeting, with worries over a likely hawkish stance by the Fed could keep local investors guarded in their approach. Technically, the Nifty took resistance near 18775 and reversed sharply.
On weekly charts, the index has formed a Hammer candlestick formation, which indicates further weakness from the current levels. As long as the index is trading below 18675, the weak sentiment is likely to continue and below the same it could slip till 20-day SMA (Simple Moving Average) or 18450.
Further downside may also continue which could drag the index to 18,350. On the flip side, a fresh uptrend rally is possible only after the dismissal of 18,675 and above the same the market could rally till 18800-18900.
Ajit Mishra, SVP - Technical Research, Religare Broking
All eyes are now on the US Fed policy outcome for cues, which is scheduled on June 14. In the following sessions, the European Central Bank (ECB) and Bank of Japan will also announce their policy decision. On the macroeconomic front, participants will be tracking IIP data, CPI Inflation and WPI Inflation during the week. Apart from these factors, the updates on progress of the monsoon will also remain on their radar.
The last two weeks' move of the benchmark index shows indecisiveness among participants around the record high and it is likely to end soon. We recommend maintaining a positive stance till Nifty holds 18,400 and suggest focusing on sectors, which are showing relatively higher strength like auto, FMCG & realty and picking selectively from others.
In case of a decline, the 18,100-18,200 zone would offer the needed cushion. We feel the prevailing outperformance may continue in the broader indices so continue to add quality stocks from midcap and smallcap space
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