The market gave a thumb-up to the pause in rate hikes as frontline indices the Sensex and the Nifty ended in the green on April 6, extending their gains into the fifth consecutive session. However, weak global cues capped the gains.
Major global peers traded cautiously as traders awaited US jobs data to see how the US economy is faring and if there is a growing risk of a global economic slowdown.
Sensex opened 62 points lower at 59,627.01 but jumped 261 points in intraday trade after the Reserve Bank of India (RBI) announced a pause in repo rate hikes considering the evolving macroeconomic situation at home and the recent banking crisis in the West.
The Monetary Policy Committee (MPC) of the RBI decided to keep the repo rate unchanged at 6.5 percent and maintained the 'withdrawal of accommodation' stance.
RBI Governor Shaktikanta Das said that the MPC’s decision to pause the repo rate hike is for this meeting only. The fight against inflation will continue until there is a durable decline in inflation. RBI aims to contain inflation to the zone of 2-6 percent.
Top analysts believe the RBI's move is positive for the market even though the risk of inflation and a slowing global economy is not over yet.
“RBI’s pause in the rate hike cycle is the appropriate step at this point. It was necessary to assess the impact of previous rate hikes and balance the growth and inflation dynamics,” said Arun Singh, Global Chief Economist, Dun & Bradstreet India.
“There is renewed caution in the global economic landscape and optimism for a turnaround in global economic prospects is waning. Bank collapses in the first half of March 2023 have led to fears of contagion risk across financial markets. Even though India's growth has been resilient so far, the country is not decoupled,” said Singh.
The 30-share pack Sensex closed 144 points, or 0.24 percent, higher at 59,832.97 while the Nifty50 ended at 17,599.15, up 42 points, or 0.24 percent.
Mid and smallcaps outperformed the benchmark. The BSE Midcap and Smallcap indices rose 0.71 percent and 0.70 percnt, respectively.
The overall market capitalisation of BSE-listed firms rose to ₹262.4 lakh crore from ₹261.3 in the previous session, making investors richer by ₹1.1 lakh crore in a single session.
Over 100 stocks, including Cholamandalam Investment and Finance Company, Dr Reddy's Laboratories, Godrej Consumer Products and UltraTech Cement, hit their 52-week highs in intraday trade on BSE.
Crude oil prices declined on concerns over weak demand as the outlook for global economic growth remains sombre. Brent Crude traded near the $85 per barrel mark.
The rupee ended 11 paise higher at 81.90 per dollar.
Top Nifty gainers and losers
As many as 30 socks ended in the green in the Nifty index while 20 ended lower.
Shares of Bajaj Finance, Adani Enterprises and Tata Motors ended as the top gainers while those of HCL Tech, ONGC and ICICI Bank ended as the top losers in the Nifty index.
IT, FMCG, Consumer Durables fall
Among the sectoral indices, Nifty IT (down 0.73 percent), FMCG (down 0.54 percent) and Consumer Durables (down 0.53 percent) bucked the trend to end lower.
Nifty Realty surged 2.84 percent after the RBI retained the repo rate while the Auto index rose 0.90 percent. Nifty Bank ended with a mild gain of 0.10 percent, Nifty PSU Bank 0.33 percent higher and Nifty Private Bank flat.
Expert's views on markets
Vinod Nair, Head of Research at Geojit Financial Services observed that the surprising policy move to pause interest rate hikes has had a convincing effect on bond yields and the stock market.
"A plausible peaking of the interest rate will have a positive effect on the financial markets, which was reflected in today’s drop in yield and marginal upside of the domestic stock market when the Asian market was negative," Nair said.
"However, the trend to continue during the year will depend on a consistent fall in inflation, which is forecasted to stay elevated above the FY24 target. Given the high gap between current and target inflation, the RBI will have to hold the rates high for a long period, limiting the upside," said Nair.
Technical views on markets
Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas underscored that the Nifty managed to close above the falling channel which is a positive sign. The daily Bollinger bands are contracting, indicating that the upside might be limited from now on.
"On the hourly momentum indicator, we can observe negative divergence which indicates a loss of momentum on the upside. After witnessing 700 points rally in the last five trading sessions a consolidation is highly likely," said Gedia.
"We expect the Nifty to consolidate over the next few trading sessions and any dip towards the support zone of 17,500 – 17,430 should be used as an opportunity to create fresh long positions," said Gedia.
Key market data
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.