Market Trade Higher After RBI's Pause In Rates; Sensex, Nifty Near Day's High; All Sectoral Indices Bullish

The stock market reacted to RBI's monetary policy positively, since a pause in the repo rate was on expected lines. Sensex and Nifty 50 are trading near their day's high, while the rupee appreciated against the US dollar. Both private and PSU bank stocks are in the green as well. India's volatility index dipped nearly 3%.

At the time of writing, Sensex traded at 65,825.55, up by 193.98 points or 0.30%, which was near its day's high of 65,888.98. While the 50-scrip benchmark Nifty also performed at 19,609.20, higher by 63.45 points or 0.32% -- near its intraday high of 19,624. All sectoral indices were trading higher with PSU banks, and pharma stocks emerging as top gainers.

Bank Nifty surged over 103 points to trade at 44,317.20. The index crossed over 44,400 mark earlier in the day.

Bajaj Finserv was the top gainer up by 2.3% followed by its subsidiary Bajaj Finance which gained by 1.4%. ITC, Titan, JSW Steel, Maruti Suzuki, IndusInd Bank, and SBI were also among the top performers. However, Hindustan Unilever, Bharti Airtel, Power Grid, and Asian Paints traded in red.

Also, Midcap and Smallcap indexes on BSE surged by 164.21 points and 181.07 points to trade at 32,030.63 and 37,830.58 respectively.

Meanwhile, at the interbank forex market, the rupee appreciated against the US dollar to trade at 83.1825 up by 0.10%. The local unit strengthened as much as 83.1725 against the greenback. On the previous day, the rupee settled at 83.2675 against the dollar.

After the assessment of the current and evolving macroeconomic situation, the MPC members which commenced their 3-day policy meeting on October 4th, decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50% on Friday.

This is in line with expectations of economists in a poll conducted by GoodReturns between September 20-28. RBI resorted to the status quo since the start of this fiscal in April, after aggressively hiking rates by 250 basis points cumulatively from May last year until February 2023 to control a stubbornly high CPI inflation.

Accordingly, the standing deposit facility (SDF) rate remains unchanged at 6.25%, while the marginal standing facility (MSF) rate and the Bank Rate are at 6.75%.

MPC's monetary policy outcomes are not expected to have a significant impact on the stock market since a pause in the repo rate was gauged. However, the upcoming US job data later in the day may trigger sentiments in the market.

According to Santosh Meena, Head of Research, Swastika Investmart, the RBI's decision to maintain the status quo in its policy has been received positively by the market, despite growing concerns about rising inflation on a global scale. Nevertheless, the impact of this decision is expected to be limited, as the market's attention is anticipated to shift towards global market dynamics, notably the dollar index and US bond yields.

Technically speaking, Meena added, "Nifty has managed to surpass the 50-day moving average (DMA), suggesting potential for a further recovery towards the 20-DMA level of 19,800. However, a significant bullish momentum is projected to materialize only upon breaching the 19,800 mark."

Earlier in the morning, Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "The MPC's monetary policy, is unlikely to impact the markets since no changes are expected in policy rates or stance. From the market perspective, the more important thing will be the US jobs data expected tonight. If the jobs data comes strong the market will react negatively discounting a rate hike by the Fed in the coming policy meeting. On the other hand, if the jobs data is weak, the market will rally discounting a pause by the Fed."

He added, "Expected Q2 results will influence stock prices in the coming days. Financials, particularly banking, automobiles, hotels, real estate, cement and capital goods will do well. A possible surprise may come from IT in the form of higher-order bookings. Even if the results are expectedly poor, the stocks may rebound on the back of better orders and commentary."

Giving a broader outlook, Anil Rego, Founder and Fund Manager at Right Horizons said, "Since inflation is moderating, economic activity is steady and despite headwinds from oil prices as India is poised to be the growth engine for the global economy the markets were expecting the repo rate to be unchanged at 6.5%. We believe markets in the near term will now be driven by earnings season and growth during the festive season."

Disclaimer:

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