Nifty Bank index tops 39,000 as bank stocks in focus after RBI's dovish policy
Premium- The Reserve Bank of India (RBI) on Thursday kept key policy rates repo and reverse repo rates unchanged in its monetary policy review announced today
The Nifty Bank index topped the 39,000 mark after a status quo policy from the Reserve Bank of India (RBI). The RBI kept repo rate unchanged on Thursday, but what surprised markets is leaving its reverse repo rate unchanged. There were expectations that RBI may hike the reverse repo rate and may change its stance to neutral from accommodative in tandem with hawkish global central banks amid rising inflation.
"Contrary to many central banks, RBI acts dovish and kept interest rates unchanged with an accommodative stance. RBI believes that inflation will peak out soon and there is a need for continuous support to the economy. Generally, it is considered positive for the market but it will be important to see how the market will read it because there could be a risk that RBI will remain behind the curve that may cause inflation in the future however the overall structure looks bullish for Indian market after a recent correction. Rate-sensitive sectors like infra, real estate, auto, and financial may continue to outperform," said Parth Nyati, Founder, Tradingo.
The RBI governor has categorically communicated that "continued policy support is warranted for a durable and broad-based recovery." This clear pro-growth stance is desirable at the current juncture, experts believe.
"Market has responded positively to the policy as of now with banking stocks exhibiting strength. However, the short to medium- term trend of the market is likely to be influenced by the inflation data in US expected late tonight," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Experts further said that RBI is more focused on protecting the nascent recovery rather than on increasing rates. This will fray a lot of nerves and will cool down the bond yields.
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“The interest rate-sensitive stocks like banks, real estate, and autos will be the biggest beneficiaries. Overall very positive in an environment where rates are rising globally. With the omicron worry also behind us, we expect that some kind of reverse taper tantrum will play out in the Indian stock market," said Abhay Agarwal, Founder, and Fund Manager, Piper Serica, SEBI Registered PMS.
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