After a lackluster start to the first day of October series, the market recovered sharply post the Reserve Bank of India (RBI) monetary policy announcement.
The Reserve Bank of India (RBI) announced a 50 basis points hike in the repo rate to 5.9 percent, stepping up its fight against persistently high inflation.
The RBI governor Shaktikanta Das projected real GDP growth rate for FY23 at 7 percent down from the 7.2 percent estimated earlier and expect inflation to remain elevated at around 6% in the second half.
Also, governor also said RBI will remain focused on the withdrawal of accommodation stance.
At Close, the Sensex was up 1,016.96 points or 1.80% at 57,426.92, and the Nifty was up 276.20 points or 1.64% at 17,094.30.
However, for the week, both the main indices lost over 1 percent each.
"An in-line rate hike along with the RBI’s confidence in the economy’s growth momentum aided the domestic market to alter the seven-day losing streak," said Vinod Nair, Head of Research at Geojit Financial Services.
"The decision to retain inflation at 6.70% with a marginal cut but a healthy GDP forecast of 7.0% indicates the resilience of the Indian economy."
"Although the commentary warned about prevailing risks to the domestic economy from the global economy, the MPC refrained from sounding very hawkish. Continuation of the policy stance as 'withdrawal of accommodation' indicates more rate hikes in the future, but data-driven," he added.
Hindalco Industries, Bharti Airtel, IndusInd Bank, Bajaj Finance and Kotak Mahindra Bank were among the top gainers on the Nifty. However, losers included Shree Cements, Asian Paints, Britannia Industries, Coal India and Dr Reddy’s Laboratories.
Among sectors, Nifty Bank, Auto, Energy and metal closed 1-2 percent higher.
Also Read - Central bank lowers real GDP growth estimate for FY23 to 7% from 7.2%
Stocks and sectors
On BSE, all the sectoral indices ended in the green with Auto, Power, Capital Goods, Bank, Realty and Metal up 1-2 percent. However, Healthcare and Information Technology indices gained 0.5 percent each.
BSE Midcap and Smallcap indices added 1 percent each.
A long build-up was seen in India Cements, Canara Bank, Granules India, while a short build-up was witnessed in Indraprastha Gas, Mahanagatr Gas and Gujarat Gas.
On the BSE - Aditya Birla Fashion, Bharti Airtel, Cipla, GPT Infraprojects, Oil Country Tubular, RPG Life Sciences, Tejas Networks - touched their 52-week high.
Outlook for October 3
Prashanth Tapse - Research Analyst, Senior VP (Research), Mehta Equities:
Post RBI raises repo rate by 50 bps - stepping up its fight against persistently high inflation, markets gained strong momentum as governor states economic activity are in stable mode with inflation number inline with RBI expectation and manageable range while geo political issues led to currency risk but bearable as of now.
Regarding liquidity concern he says we are in surplus to manage the situations. This fired the bulls to cover up all losses made in the last 3-4 days on index. Technically on the index we see major hurdles at 17327 mark and Nifty will be out of the woods only above 17707 mark.
Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities
What lifted the market sentiment was the RBI's policy rate hike of 50 bps that came in as expected and its comment that India's economy remains on strong footing despite global headwinds. The relief rally was backed by investors' preference for growth-driving stocks from banking, automobile, realty & metal space.
However, global macro factors will continue to dictate the domestic market sentiment going ahead as any fresh spell of negative news could once again trigger the downward spiral. Technically, after a sharp selloff the Nifty took support near 16800 and bounced back sharply.
On daily charts, the index has formed a long bullish candle, and also formed a promising Hammer candlestick formation on weekly charts which is broadly positive.
For the trend following traders the 200- day SMA (Simple moving Average) and 16900 would act as a sacrosanct support zone. Above the same, the reversal wave is likely to continue till 17250. Further upside may also continue which could lift the index till 17400. On the flip side, below 16900, uptrend would be vulnerable and on further decline the index could slip till 16800-16700.
Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services:
RBI in its policy meeting raised its benchmark repo rate by 50 basis points to 5.9% which was in-line with market expectation. Since May’22 RBI has raised interest rate by 190bps and expect repo rate to be raised to 6.5% in this cycle.
It expect inflation to come down close to its target of ~4% over a two-year period and projected real GDP for FY23 at 7%. Post RBI’s commentary, Nifty bounced in green and gained strength throughout the session. The rally was especially seen in banking sector stocks. This has also given some support to falling rupee which had depreciated by 7% since April’22.
With most key events now behind, market finally found some strength on Friday. After 7 consecutive fall, Nifty witnessed strong rally and closed with gains of almost 300 points. It also reclaimed the 17,000 zones, making the short term technical view positive.
Nifty can now move towards 17,500-17,700 zones with key support around 17,000 and 16850. Auto and consumption sectors would be in focus ahead of monthly sales data and high demand in the ongoing Navaratri festival. Pharma sector is seeing some value buying as market focused on defensive names in times of global uncertainty.
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