Key barometers hit fresh intraday high in early afternoon trade after RBI decided to keep key rates unchanged. The Nifty touched 12,150 level. PSU banks advanced after rates on 10-year benchmark federal paper declined.

At 12:26 IST, the S&P BSE Sensex, gained 147.58 points or 0.36% at 41,290.24. The Nifty 50 index was up 46.25 points or 0.38% at 12,135.40.

The broader market traded higher. The S&P BSE Mid-Cap index was up 0.72% while the S&P BSE Small-Cap index was up 0.48%.

The market breadth was positive. On the BSE, 1317 shares rose and 867 shares fell. A total of 143 shares were unchanged.

In Nifty 50 index, 38 stocks advanced while 12 stocks declined.

RBI Policy:

The Reserve Bank of India kept key policy rates unchanged in its sixth bi-monthly monetary policy for 2019-20. On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (6 February 2020) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15%. Consequently, the reverse repo rate under the LAF remains unchanged at 4.90% and the marginal standing facility (MSF) rate and the Bank Rate at 5.40%. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

The CPI inflation projection is revised upwards to 6.5% for Q4 March 2020; 5.4-5.0% for first half of fiscal year ending March 2021 (H1:2020-21); and 3.2% for Q3 December 2020, with risks broadly balanced.

GDP growth for 2020-21 is projected at 6%; in the range of 5.5-6% in H1:2020-21 and 6.2% in Q3 December 2020.

The next meeting of the MPC is scheduled during March 31, April 1 and 3, 2020.

Buzzing Index:

The Nifty Bank index was up 0.64% to 31,199.70 after RBI policy outcome. Among private banks, RBL Bank (up 3.86%), Yes Bank (up 3.32%), Federal Bank (up 2.15%), Axis Bank (up 2.08%), ICICI Bank (up 0.69%) and IndusInd Bank (up 0.08%) advanced.

Among PSU banks, Andhra Bank (up 3.43%), United Bank of India (up 2.83%), UCO Bank (up 2.66%), Punjab National Bank (up 1.93%), IDBI Bank (up 1.9%), Bank of Baroda (up 1.82%), SBI (up 1.67%) Bank of India (up 1.62%), Union Bank of India (up 1.23%), Oriental Bank of Commerce (up 1.15%), Central Bank of India (up 1.12%), Indian Bank (up 1.1%), Syndicate Bank (up 0.84%) and Canara Bank (up 0.71%) advanced.

The yield on 10-year benchmark federal paper fell to 6.486% at 12:17 IST compared with 6.505% in the previous trading session.

The falling yields and rising bond prices are credit positive for state-run banks as mark-to-market (MTM) profit from the government bonds' increases in their investment portfolios.

Derivatives:

The NSE's India VIX, a gauge of market's expectation of volatility over the near term, declined 1.41% to 13.9725. The Nifty February 2020 futures were trading at 12,136.10, a premium of 2.45 points compared with the spot at 12,133.65.

On the options front, the Nifty option chain for 27 February 2020 expiry showed maximum call open interest (OI) of 23.41 lakh contracts at the 12,500 strike price. Call writing was witnessed at 12,100 strike price, which added 2.31 lakh contracts.

Maximum put OI of 30.85 lakh contracts was seen at 12,000 strike price. Massive put writing was observed at 12,100 strike which added 3.56 lakh contracts.

The option chain indicates that the Nifty will stay between 12,000 and 12,500 level till February expiry.

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