Markets soared higher during the first half on Wednesday as the Reserve Bank of India’s decision to keep rates unchanged and maintain its accommodative stance to support economic growth.
At 1 pm, the BSE Sensex was at 49,857.02, ruling almost near day’s high of 49,820.53, up 619 points or 1.26 per cent. The Sensex touched a low of 49,093.90. The Nifty 50 was also near the day’s high at 14,854.55, up 171.05 points or 1.16 per cent.
The market was mainly driven by the dovish stance of the RBI. As rates remained unchanged, rate-sensitive stocks such as banking, financials, auto, infrastructure and realty are likely to benefit from the announcements, as per experts.
Furthermore, the RBI Governor Shaktikanta Das said that the inflation is seen at 5.2 per cent in Q1 and Q2 of FY22; 4.4 per cent in Q3 and 5.1 per cent in Q4.
“Overall, there wasn’t much surprise or novelty in the Monetary Policy statement. RBI has chosen the “wait-and-watch” approach as the economy stabilises amidst a heightened pandemic situation. RBI continues to be accommodative and supportive (of liquidity), while remaining watchful of evolving inflationary trends and the surplus liquidity,” said Unmesh Kulkarni, Managing Director Senior Advisor, Julius Baer India.
Gaurav Garg, Head of Research, CapitalVia Global Research Limited, said, the RBI kept the rates unchanged and that boosted positive sentiment further.”
The growth projections by the International Monetary Fund too helped markets across Asia. For India, IMF has predicted a growth of 12.5 per cent for 2021 and 8 per cent for 2022.
State Bank of India, JSW Steel, Powergrid, Bharti Airtel and IndusInd Bank were among the top gainers on the Nifty 50. Only three stocks out of the 50-pack Nifty- Adani Ports, Tata Consumer and TCS were in the red.
Sectoral and broader indices
Among the sectoral indices, all indices were in the green with Nifty PSU Bank recording the highest gains, up 3.25 per cent.
Nifty Bank was up 2.06 per cent while Nifty Financial Services was up 1.66 per cent. Nifty Auto was up 1.40 per cent. All broader indices were in the green. India VIX, the volatility index, was down 1.19 per cent.
The Nifty Midcap 50 was up 1.45 per cent while the Nifty Smallcap 50 was up 1.72 per cent. The S&P BSE MidCap was up 0.40 per cent while the S&P BSE SmallCap was up 1.11 per cent.
“We continue to believe that rate cuts are behind us, unless the Covid-19 situation really goes out of control, forcing much harsher lockdowns and loss of economic activity, which isn’t the base case currently. A strong vaccination drive, coupled with temporary region-specific lockdown measures might be the order of the day. We expect the 10 year g-sec to trade in a range of 5.9 per cent - 6.3 per cent in the near-term. Yields could see some short- term relief (owing to pandemic risks to growth), but could see a fresh pickup in the second half of FY21-22 once the pandemic situation eases again and the focus is back on economic recovery,” added Kulkarni.