Markets at fresh closing high ahead of RBI monetary policy review
Premium- The BSE Sensex edged 382.95 points or 0.74% higher at 52,232.43. The Nifty gained up 114.15 points or 0.73% at 15,690.35.
Indian markets continued to hit new record highs as economy is expected to expand with second wave of covid 19 ebbing. Gaining nearly 1% ahead of the Reserve Bank of India’s monetary policy review on Friday, the markets are expecting no change in the key interest rates. The central bank’s commentary on growth and inflation would be closely watched out.
Both the benchmark indices hit record closing highs on Thursday. The BSE Sensex edged 382.95 points or 0.74% higher at 52,232.43. The Nifty gained up 114.15 points or 0.73% at 15,690.35. While Nifty hit its new intra-day record high of 15705, the Sensex is just tad away from its previous all-time high of 52516 touched in February this year.
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Shares in Asia-Pacific were mixed on Wednesday with the Nikkei in Japan gaining 0.46% while South Korea’s Kospi closed 0.72% higher. Hong Kong’s Hang Seng fell 1.13% and Shanghai composite in China was down 0.76%.
“Global cues were mixed as investors weighed inflation concerns ahead of key US economic data. The overall structure of the market remains positive as states gear up to unlock their economy in phased manner, with fresh covid cases continuing its southward trajectory. Vaccination pace has gathered some pace and with increase in supplies soon, the drive will gain further momentum. Thus, as the second covid-19 wave continues to recede in India and pace of vaccination picks up, we expect the long-term fundamentals to remain intact" said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
Services activity contracted in May, snapping eight straight months of expansion, and reflecting the severity of the second wave of covid and regional lockdowns subsequently. Data released by IHS Markit, on Thursday, showed purchasing managers’ index (PMI) for services fell to 46.4 in May from 54 in April. A figure above 50 indicates expansion, while sub-50 signals contraction.
“The contraction in the services index shows the bigger hit to contact-intensive activities during the second wave of movement curbs. However, the activity loss is still marginal compared to the near-washout seen during the first virus wave in April-May last year. Services activity fell as new orders declined and as movement restrictions led to shutdowns at some firms. Firms reported a decline in consumer demand across products, with business optimism also fading," said Rahul Bajoria, chief economist, Barclay India.
Post the brutal blow of second wave the monetary policy committee (MPC) is widely expected to support the fragile economy through policy stance.
“While policy rates are likely to be unchanged, it will be key to see of RBI MPC suggests any changes to growth forecast. Q1 FY22 so far has been muted given the pandemic and resultant localised lockdowns. Bond markets would also be eager to see GSAP (government securities acquisition programme) 2.0 announcement for July-September quarter, as government bond supply may not be met with commensurate demand. Bottomline, despite inaction on rates front, walk the talk will be key to market movement post policy," said Lakshmi Iyer, CIO (debt) and head products, Kotak Mutual Fund.
Meanwhile, India volatility index (VIX) fell 8.5% to end at 15.75 indicating anxiety among investors is cooling off.
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