Closing Bell: Market ends flat as RBI holds repo rate, cuts CRR

Indian equity indices ended marginally lower in the volatile session on December 6. At close, the Sensex was down 56.74 points or 0.07 percent at 81,709.12, and the Nifty was down 30.60 points or 0.12 percent at 24,677.80.

We wrap up today's edition of the Moneycontrol live market blog, and will be back Monday morning with all the latest updates and alerts. Please visit https://www.moneycontrol.com/markets/global-indices for all the global market action.

The Nifty continues to sustain above the breakout from an inverse head-and-shoulders pattern, indicating underlying market strength. In such conditions, adopting a buy-on-dips strategy seems prudent, especially with the potential for an upward move toward 25,500 in the short term. However, minor pullbacks following a sharp rally are possible, further emphasizing the effectiveness of buying on dips to capitalize on this trend.

Markets traded within a narrow range and ended the day nearly unchanged despite an eventful session. After a flat opening, the Nifty remained confined to a tight band, as the MPC meeting outcome aligned with market expectations and failed to evoke a significant reaction. Sectoral trends were mixed, with gains in metal and auto stocks, while IT, banking, and energy sectors remained subdued. On the broader front, midcap and smallcap indices continued to exhibit strength, posting gains of 0.44% to 0.85%.

We maintain our bullish outlook and recommend adopting a "buy on dips" strategy, emphasizing selective stock picking. While the strong performance from key sectors such as banking and IT is likely to persist, we anticipate selective contributions from other sectors as well. Additionally, the broader indices, particularly midcap and smallcap segments, are presenting promising opportunities, making selective investments in this space worthwhile.

Though benchmark indices concluded on a flattish trend, Indian broader indices displayed optimism as the RBI acknowledged the downward growth trend while last-mile inflation persisted. By lowering the CRR and injecting Rs 1.16 lakh crore into the financial system, the RBI aims to stimulate economic growth amid increased liquidity.

The overall market exhibited a mixed outlook, reflecting a cautious yet resilient stance, with sector rotation and specific stock movements shaping market sentiment.

Markets have been rising for the past five trading sessions and hence a small breather was expected. With RBI springing no major surprise in its credit policy announcement, investors booked profit in select frontlines. Although the undertone remains that of caution, the return of FIIs into local equities through select bullish bets has come as a major reprieve to investors.

Indian rupee ended higher at 84.69 per dollar on Friday versus previous close of 84.73.

Indian equity indices ended marginally lower in the volatile session on December 6.

At close, the Sensex was down 56.74 points or 0.07 percent at 81,709.12, and the Nifty was down 30.60 points or 0.12 percent at 24,677.80. About 2298 shares advanced, 1529 shares declined, and 98 shares unchanged.

On the sectoral front, except IT and media, all other indices ended in the green with auto, metal, FMCG, telecom, PSU Bank up 0.3-1 percent.

BSE Midcap index was up 0.3 percent and smallcap index was up 0.6 percent.

Bajaj Auto, Axis Bank, SBI Life, Tata Motors, Maruti Suzuki are among top gainers on the Nifty, while losers were Adani Ports, Cipla, Bharti Airtel, HDFC Life and Asian Paints.

Indian Rupee appreciated today as the Reserve Bank of India left repo rate unchanged at 6.5% in its monetary policy decision. However, it cut the Cash Reserve Ratio (CRR) to 4% from 4.5%. It left the repo rate unchanged as core inflation remained above RBI’s tolerance levels. A decline in US Dollar and crude oil prices also supported the Rupee. However, weak domestic markets capped sharp gains.

We expect Rupee to trade with a slight negative bias as the RBI lower India’s GDP growth for FY25 to 6.6% from 7.2% in its previous projections. It is revised inflation projection to 4.8% for FY25 from 4.5% earlier. Demand for US Dollar may also keep the Rupee under pressure. However, weakness in crude oil prices and fresh FII inflows may support the Rupee at lower levels. Any intervention by the RBI may also support the Rupee. Traders may take cues from non-farm payrolls report from the US. USDINR spot price is expected to trade in a range of Rs 84.45 to Rs 84.95.

The company's step-down wholly owned subsidiary, Dr. Reddy’s Laboratories Kazakhstan LLP, has received a penalty order of KZT 17,597,212 (Rs 2.87 million) from the Department of State Revenue, Bostandyk, Kazakhstan, for disallowance of claim of certain expenses by the tax authorities for CY 2021.

Nihir Parikh has resigned as CEO of Nykaa Fashion.com, effective December 5, due to personal commitments.

Ajay Shriram Patil has resigned as Chief Financial Officer of the company due to personal reasons, effective January 9, 2025.

Usha Martin Telematics and Omega Telecom Holdings, units of Vodafone Group Plc, exited the tower infrastructure company by selling their entire 3.003 percent shareholding.

Domestic and global institutional investors, including AADI Financial Advisors LLP, VFTC, Kotak Mahindra MF, National Pension System (NPS) Trust, Susquehanna Pacific, Blackstone, BofA Securities Europe, Copthall Mauritius Investment, Ghisallo Master Fund, ICICI Prudential Life Insurance Company, Jupiter India Fund, Kadensa Master Fund, Morgan Stanley, Blue Diamond Properties, Vanguard, Optimas Global Alpha Fund, QRT Master Fund, Qube Master Fund, Societe Generale, and Jupiter Global Fund, acquired the 3.003 percent stake.

By opting to leave the interest rate unchanged for the eleventh consecutive time, the RBI has emphasized continuity. The decision to infuse liquidity by cutting the CRR, injecting over Rs 1 trillion into the banking system, is a welcome step. However, this measure alone may not significantly shift market sentiment in the absence of an interest rate cut.

Given the current dynamics, Indian markets may experience moderation as FIIs continue their selling. Meanwhile, global trends reveal contrasting trajectories, with US markets up by around 11% while Indian markets remain down by roughly half a percent since their September low.

In this evolving environment, diversification across global markets could be a prudent strategy for investors seeking balanced portfolios, improved returns, and exposure to varied growth opportunities, alongside their investments in the promising Indian market.

#1 Pemetrexed is a type of chemotherapy used in the treatment of lung cancer

The company's subsidiary, Subex Account Aggregator Services, has surrendered its Account Aggregator license to the Reserve Bank of India.

Landmark Cars has executed an Asset Transfer Agreement to acquire an existing Kia Showroom business at Bowenpally, Hyderabad, following the receipt of Kia India’s approval to operate a Kia showroom in Hyderabad, Telangana.

For the Company, this will be the second Kia Showroom in Hyderabad and the fifth Kia outlet in the country.

This showroom will be a part of M/s Landmark Premium Cars Private Limited, a wholly owned subsidiary company of Landmark Cars.

The Sensex was up 35.21 points or 0.04 percent at 81,801.07, and the Nifty was down 2.25 points or 0.01 percent at 24,706.15. About 2137 shares advanced, 1246 shares declined, and 89 shares unchanged.

In its MPC meeting concluded today, RBI kept its policy rates on hold, in line with its steadfast focus on durably aligning CPI with the 4% target. Pertinent to note that it wasn’t unduly perturbed by sharp moderation in Q2 GDP growth, which it saw as transitory. It instead chose to wait for more confirmation of CPI cooling off, especially given two elevated prints since the last MPC meet. RBI however cut CRR by 50 bps to alleviate liquidity tightness caused by aggressive FX intervention in the recent weeks.

Going forward, CPI is expected to moderate over the coming months and is projected to reach around 4% by Q2FY26, while GDP projections have been revised downwards by RBI. Given this backdrop, we continue to expect a shallow rate cut cycle ahead beginning in February.

Shares of BSE Ltd have been on a roll in recent days after surging over 19 percent in three straight sessions to hit a record high of Rs 5,409.65 on December 6. This comes after the scrip recorded a steep 14 percent jump in the previous session. Read More

The RBI has walked a delicate balance between Inflation and growth by keeping repo rates unchanged and cutting CRR rates. Estimate of growth is revised downwards while inflation is revised upwards to reflect the Q2 GDP number.

SEBI has asked Mishtann Foods to retrieve nearly Rs 100 crore that it misappropriated or diverted through group entities and transferred to the company's promoters and directors. The regulator has also restrained the company from raising money from the public, and prohibited its promoters and senior management from accessing the securities market. Additionally, 12 entities have been barred from associating with any registered intermediary until further orders.

RBI’s recent decisions show clear attempt to strike a balance between maintaining liquidity and ensuring economic stability. The 50-basis-point CRR reduction, rolled out in two phases, is definitely going to ease short-term borrowing costs, which is a welcome move for the banking system. But what stands out to me is the downward revision in GDP growth for FY25 to 6.6%, from the earlier 7.2%. That’s a significant adjustment, reflecting the slower momentum we’ve been seeing recently.

On the inflation front, the projection has been nudged up to 4.8% for FY25, with expectations of it settling at 4% by Q2 FY26. This upward shift aligns with persistent pressures like food prices, though relief is expected in the coming quarters. The RBI also raised the interest rate ceiling on FCNR(B) deposits by 200 basis points, which to me signals concern over the external sector, particularly the rupee’s stability against the dollar.

What’s interesting is how the RBI seems to be leaning on its usual mix of prudence and patience. I feel it’s unlikely we’ll see significant rate cuts anytime soon, given the global uncertainties. While the CRR reduction helps liquidity, the rate hikes we’ve seen since May 2022 will likely take longer to reverse. Overall, this cautious stance makes sense, it’s about creating room for adjustments while managing external vulnerabilities.

#1 Management highlighted strong growth outlook, driven by India & West Asia

#2 Management continues to step up efforts to gain traction in US, especially among mid-large tier banks

#3 Recent purchase order from RBI may drive deals from other Indian banks

#4 Post meeting, remain constructive on Newgen's growth prospects

As anticipated, the RBI has maintained its pause on interest rates. As the growth deceleration is not yet alarming, it provides the RBI with enough leeway to keep interest rates unchanged, focusing on controlling inflation and stabilising the currency. However, the tone of the central bank has shifted towards remaining cautious of growth slowdown as witnessed in downward revision of GDP projections for FY 25.

The concerns of liquidity have been addressed through 50bps cut in the CRR, this should enable efficient credit flow to key sectors and support growth. Currently, the central banks are grappling sharply depreciating INR, softening bond yields, persistent inflation, and a slowdown in growth. A rate cut could potentially be in the horizon as there are risks to consumption slowdown especially in the lower income groups.

The company has executed a renewal of its technical collaboration agreement with Fuji Oozx Inc, Japan, for five years, effective December 5.

The MPC has decided to lower the CRR by 50 basis points, likely releasing approximately Rs 1.10 lakh crore to Rs 1.2 lakh crore of liquidity parked with the RBI. This surplus liquidity can be utilised by banks for lending, potentially stimulating economic growth, provided banks pass on the benefits of the cut to borrowers. Typically, a CRR reduction also enhances banks' net interest margins.

We anticipate rate cuts at the end of FY25 or at the beginning of FY26 since inflation has intensified. Typically, NBFCs are better positioned to benefit from cuts in rates as credit growth will improve followed by banks. Also, credit-sensitive sectors like auto and real estate will see higher demand.

Zen Technologies shares surged nearly 8 percent to a lifetime high of Rs 2,033 after Nuvama Institutional Equities reiterated its 'Buy' rating on the stock, setting a target price of Rs 2,200. This implies an upside of 16.5 percent from the stock's previous close.

The brokerage's bullish stance followed Zen Tech signing a memorandum of understanding (MoU) with Florida-based AVT Simulation to penetrate the US defense market. The collaboration was announced during the National Training & Simulation Association's Interservice/Industry Training, Simulation, and Education Conference.

"This is strategically positive for Zen Tech, which shall expand its serviceable market (details awaited) for both simulation training and anti-drone segments while offering (Unmanned Aerial System) UAS-technology to AVT," Nuvama said.

Shares of Zaggle Prepaid Ocean Services rose over 4 percent on December 6 after the company secured three orders in just two days. With the gains in today's session, the stock also hit an intraday hit of Rs 521, sitting just an inch away from its record high of Rs 523.30.

The first order won by the company is a five year contract for Zaggle's fleet program from AGP City Gas. Following that, the company won an one year order from Hitachi India. Under this order, Zaggle would provide Hitachi India with its Zaggle propel rewards solution. Aside from these, the company also signed a two year master agreement with Blink Commerce to provide its Zoyer solution.

The RBI’s decision to keep the repo rate unchanged at 6.5% for the eleventh straight meeting reflects a prudent and calculated approach in the current economic environment. As inflationary pressures persist, particularly in food prices, the central bank’s focus on price stability aligns with its commitment to maintaining economic resilience. The upward revision of the inflation forecast to 4.8% for FY25 indicates the RBI’s cautious optimism, acknowledging supply-side challenges while aiming to anchor expectations.

The projected GDP growth of 6.6% for FY25 signals underlying strength in the economy, supported by a recovery in high-frequency indicators and sustained demand across key sectors. The CRR reduction, releasing ₹1.16 lakh crore into the banking system, is a welcome move to boost liquidity and support credit growth, especially for sectors such as infrastructure and housing.

From an investment perspective, the RBI’s neutral stance provides much-needed stability. For fund managers, this is an opportune moment to focus on sectors poised to benefit from sustained domestic demand and India’s long-term growth trajectory. While global headwinds remain a concern, India’s strong macroeconomic fundamentals and policy continuity offer a robust foundation for investors to navigate the current landscape with confidence.

Increased inflation, subdued consumption, and evolving macro situation is resulting in a tricky situation for the monetary policy decision. The neutral stance is in line with our expectations. We do not believe that there would be more than 50 bps cut in 2025.

Reduction in CRR is a positive and should impact the banks positively and ensure liquidity in the system.

Barring some of the uncertainties that could evolve in macros, we believe that the financial system is stable, RBI decisions are proactive and responsive and our economy is in a comfortable zone. The markets should continue to benefit over the near term.

FPI inflows have been challenging and steps to support growth in FPI flows, specially from the NRI's will have a positive impact on the markets. We believe that as the transition happens in the US, the FPI's should increase flows to Indian markets.

Increased inflation, subdued consumption, and evolving macro situation is resulting in a tricky situation for the monetary policy decision. The neutral stance is in line with our expectations. We do not believe that there would be more than 50 bps cut in 2025.

Reduction in CRR is a positive and should impact the banks positively and ensure liquidity in the system.

Barring some of the uncertainties that could evolve in macros, we believe that the financial system is stable, RBI decisions are proactive and responsive and our economy is in a comfortable zone. The markets should continue to benefit over the near term.

FPI inflows have been challenging and steps to support growth in FPI flows, specially from the NRI's will have a positive impact on the markets. We believe that as the trasition happens in the US, the FPI's should increase flows to Indian markets.

Monetary policy has delivered exactly what the economy and markets need in the present context. The Governor’s emphasis on price stability is appropriate given the elevated level of inflation. The decision to cut the CRR by 50bp facilitating injection of Rs 1.16 trillion of liquidity into the system will ease the liquidity constraints and more importantly reduce the banks’ cost of funds. From the market perspective, this is an excellent policy response. Banking stocks will remain resilient.

The company has been appointed as the project management consultant for the execution, supervision, monitoring, and development of the Phase II campus of the Indian Institute of Management Raipur (Chhattisgarh) project, on a cost-plus basis, by the Indian Institute of Management Raipur. The project is worth Rs 148.25 crore.

As guided and discussed in this morning’s note, CRR reduction of 50 bps done, to be reduced in 2 tranches of 25 bps.

It will infuse about Rs 1.06 lakh crore liquidity, which meets with my expectations on project funding for growth.

This will be positive on most banks and their MTM profits on treasury bonds portfolio.

This is the beginning of fall in interest rates cycle. Best is yet to come