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Taking Stock | Markets end lower as RBI withdraws 'accommodative' stance, raises inflation forecast

The focus now shifts to the global market, which is anticipating a hawkish Fed policy next week

June 08, 2022 / 05:43 PM IST

The Indian equity benchmarks closed lower again on June 8, as the RBI expectedly raised the repo rate by 50 bps to 4.9 percent but its “withdrawal of accommodative stance”, indication of further rate hikes and an upward revision of inflation forecast for FY23 weighed on sentiment.

At close, the 30-pack BSE Sensex was down 214.85 points, or 0.39 percent, at 54,892.49, while the Nifty declined 60.1 points, or 0.37 percent, at 16,356.25.

The markets opened on a positive note supported by positive close in US markets on June 7 and Asian peers but RBI’s announcements made investors jittery.

“The RBI turned realistic by withdrawing their accommodative stance, realising the need for front-loaded action and increased inflation forecast by 100bps to 6.7 percent,” said Vinod Nair, Head of Research at Geojit Financial Services.

“On the bright side, there were some positive points like no increase in CRR, economic growth was maintained healthy at 7.2 percent and no additional measures were announced to reduce the liquidity of the banking system.”

Close

The absence of fresh negatives resulted in a relief rally in equity and bond markets post the announcement of MPC meet outcome, however, the rally was used by investors/traders to lighten their positions, said Deepak Jasani, Head of Retail Research, HDFC Securities.

The focus has now shifted to global markets, which are anticipating a hawkish Fed policy next week.

Also read: RBI would pause for breath after December on hikes, says QuantEco’s Shubhada Rao

IndexPricesChangeChange%
Sensex58,817.29-35.78 -0.06%
Nifty 5017,534.759.65 +0.06%
Nifty Bank38,287.8550.45 +0.13%
Nifty 50 17,534.75 9.65 (0.06%)
Wed, Aug 10, 2022
Biggest GainerPricesChangeChange%
Hindalco440.1018.70 +4.44%
Biggest LoserPricesChangeChange%
Bajaj Finance7,149.40-192.80 -2.63%
Best SectorPricesChangeChange%
Nifty Metal5759.6091.60 +1.62%
Worst SectorPricesChangeChange%
Nifty IT29701.15-266.55 -0.89%

Stocks & Sectors

The RBI decided to keep the cash reserve ratio unchanged and it enhanced the limit of individual home loans that can be sanctioned by co-operative banks. It also allowed the co-operative banks to lend to commercial real estate projects, which cheered the banking and real estate sectors.

The Nifty real estate index gained the most and closed 1.89 percent higher. Banks, metals, IT and pharma index also ended with moderate gains. The FMCG index was the worst hit by inflation worries and was down 1.05 percent.

Also read: MPC failure predicted as FY23 inflation forecast raised to 6.7%

The overall negative sentiment affected broader indices, which ended in the red. The BSE midcap lost 0.15 percent and the smallcap declined 0.33 percent.

The India VIX, which indicates the degree of volatility traders expect over the next 30 days, declined 2.87 percent from 20.42 to 19.83.

Tata Steel, SBI, Titan, Dr Reddy’s and Bajaj Finance were the top Nifty performers, gaining between 1.3 and 1.7 percent.

Bharti Airtel, ITC, Reliance Industries, UPL and Asian Paints were the worst performers of the day, losing between 1.4 to 3.2 percent.

Short build-up was seen in Gujarat Gas, GNFC and Polycab Cables, while a long build-up was seen in Glenmark Pharmaceuticals, Jindal Steel and Strides Pharma.

Of the 3,399 stocks traded on the BSE, 1,541 advanced, 1,734 declined and 124 remained unchanged.

Also read: Failure this year, lower inflation next year – RBI thinking beyond 2022

Outlook for June 9

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd

The market failed to hold onto early gains and ended the day on a negative note after the rate hike. Cynical FIIs are obsessed with the negativity surrounding Dalal Street in the backdrop of inflation concerns as WTI oil spiked to $120.97 a barrel.

The Indian rupee hit a fresh low against the dollar despite RBI’s intervention in the foreign exchange market. Technically speaking, after the down-move on June 8, the downside risk for Nifty is seen at the 16,121.

Ajit Mishra, VP-Research, Religare Broking Ltd

As the RBI policy is behind us, the market will take cues from global markets and upcoming macroeconomic data. We reiterate caution in view of a lacklustre move in the index and suggest maintaining positions on both sides.

Disclaimer: The views and investment tips of investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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Gaurav Sharma
first published: Jun 8, 2022 05:43 pm
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