Ending the week on a positive note, the benchmark indices surged after a choppy trading session on Friday as investors looked past RBI’s Monetary Policy Committee decision to keep the repo rate unchanged.
The Reserve Bank, however, signalled a shift in focus as it ramped up efforts to mop up excess liquidity to pre-crisis levels and raised its inflation forecasts, sending bond yields higher.
After settling with cuts for 3 sessions, the 30-share pack Sensex advanced on Friday, rising 412.23 points or 0.70% to settle at 59,447.18. ITC was the top gainer from the pack, rising 5% followed by DRL, M&M, Titan, Reliance and Tata Steel also pushed the index higher. Its broader peer Nifty advanced 144.80 points or 0.82% to close above 17,784.35.
Stock benchmarks rose for second week in a row with Nifty posting highest weekly close since 16 Jan, over 75% stocks ended higher this week.
All sectoral indices were trading with healthy gains with FMCG, metal, power, oil and gas indices leading the benchmarks higher.
No RBI shocker
“For the last 2-3 days the markets have been under pressure in anticipation of the RBI’s MPC policy. With that out of the picture and with no negative surprises, the Street’s took a breather and investors are relieved,” said Vinod Nair of Geojit Financial Services.
“The major beneficiaries of RBI’s accommodative stance will be banks. Outlook for the banking sector is robust due to rapid bounce in credit growth & improvement in balance sheet while preview for IT is mixed as Q4 is seasonally weak,” he added. Nifty Bank index rose 0.5% led by Bandhan Bank, Federal Bank, AU Small Finance Bank. The index has outperformed for 2nd week to post highest weekly closing since Feb 13.
About 2,293 shares have advanced, 1,093 shares declined, and 123 shares are unchanged.
Taking global risks into account, RBI Governor Shaktikanta Das said the process of returning policy settings to more normal levels would be gradual.
The 10-year benchmark bond yield rose 9 basis points to 7.017%, while the rupee strengthened against the dollar to 75.76 from 75.97 after the policy announcement.
Return of FPIs
FPI flows have also started returning to India with foreign investors buying stocks worth Rs 12,202 crore in April so far compared to outflows worth Rs 41, 123 crore in the month of March. However, the benchmark S&P BSE Sensex is down 2.9% since Feb 23, with buying by domestic funds amid a retail-trading frenzy helping limit equity losses.
European Market Impact
Stocks are ending the week on a positive note, with European equities snapping two days of declines sparked by the Federal Reserve’s plan for aggressive monetary-policy tightening.
The Stoxx Europe 600 index climbed more than 1% as investors took advantage of beaten-down stock valuations. Investors are now focused on a tight race between far-right rival Marine Le Pen and incumbent Emmanuel Macron in the runup to the first round of French presidential elections over the weekend.
Retail investors & MFs buying aggressively
Every day around 1,00,000 new investors are coming to D-Street. Though the volatility will persist, the markets will stabilise in the next 1-2 months,” said G Chokkalingam, Founder & MD, Equinomics Research & Advisory.
“A fluctuation +/- of 2-3% will exist on global cues but markets will move past Fed’s hawkish turn also, once they understand that it’s for the positive of the US economy.”
Tech Momentum
“We witnessed some positive momentum in the market after the market was able to hold above the levels of 17,800,” said Vijay Dhanotiya, Lead of Technical Research at CapitalVia Global Research Limited.
Research suggests that sustaining above 17,800 will be an important level for the market to stay positive in the short term. If the market sustains above the support levels, we expect the market to stay positive till the level of 18,000. Technical indicators suggest a volatile movement in the market, he added.
Earnings Outlook
Q4 FY22 and Q1 FY23 are likely to be challenging quarters for corporate as they try to strike a balance between rising input costs and demand. Hike in prices has so far been well absorbed, with demand remaining intact.
This can be reflected in revenue projections for our coverage universe, which is likely to grow by 25% y/y despite a higher base effect, according to a report from YES Securities.
“In fact, Q1 FY23 revenue growth is also likely to remain robust given the depressed activity in the first quarter of the preceding fiscal year.”
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