Sensex, Nifty On December 8; Key Factors That Will Influence RBI's Rates Decisions

Indian market may see a cautious start as traders will be focusing on RBI's rates decision in its bi-monthly monetary policy due today. Also, global trends are broadly bearish. In the early trade, Gift Nifty traded flat, while Asian shares were trading on a mixed note. This is despite US stocks which snapped a three-days losing streak. The majority of experts believe RBI will keep repo rates unchanged at 6.5% for the fifth time in a row.

Yesterday, the Indian stock market halted its 7-day winning streak as the Sensex and Nifty closed flat. Amidst this, the Midcap Index, however, ended at a record closing high for the 15th consecutive session. After market hours, the Sensex shed 132 points to 69,522, and the Nifty lost 37 points, closing at 20,901. Despite the overall dip, the Nifty Bank managed to gain 7 points, closing at 46,841, while the Midcap Index surged 263 points to hit a record closing high of 44,495.

Day Trading Guide Today:

Vinod Nair, Head of Research at Geojit Financial Services:

The market took a breather, the investors are in a wait-and-watch mode ahead of the monetary policy announcement. A better-than-estimated Q2 GDP growth, ease in global oil prices and drop in global bond yield will be the silver lining for the MPC. However, the expectation of a rise in domestic November inflation, a drop in Rabi cultivation and an increase in foodgrain prices will influence RBI to adopt a cautious approach in the short term.

Prashanth Tapse, Senior VP (Research), Mehta Equities:

Markets finally snapped a 7-day winning streak as weak global cues fueled selective profit-taking in domestic stocks after the recent upsurge. Investors preferred to book some profit in some richly valued stocks ahead of today's monetary policy announcement. Despite weakness the market undertone remains bullish on the back of a revival in FII flows and rising hopes that the US Fed may not tinker with rates amid moderating inflation and growth. If today's uninspiring session is any indication, then Nifty will waver and trade choppy in tomorrow's session with the biggest hurdles now seen at the psychological 21,000 mark, while the biggest support is placed at 19521 mark.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services

The market may take a breather before the next leg of the rally. Domestically, all eyes will be on the RBI policy outcome that is scheduled on Friday. Its commentary would hold importance with regard to interest rate movement. Globally as well investors await key US Nonfarm payroll and unemployment rate data that will be released on Friday and will be important for the US fed's decision-making. Overall, the undertone of the market remains positive over the medium to long term given the return of FIIs, strong macro data and healthy corporate earnings.

Ajit Mishra, SVP - Technical Research, Religare Broking

The overbought reading in the index may result in further consolidation however the bias would remain on the positive side. We suggest maintaining focus on stock selection and using intermediate dips to gradually add quality names. Apart from the domestic factors, traders should keep a close eye on the performance of the US markets for cues.

Rupak De, Senior Technical Analyst at LKP Securities

The Nifty remained sideways during the session, hovering within the bands of 20850-20950. Sentiment remains somewhat cautious ahead of the RBI policy meeting. The near-term trend remains sideways to weak as long as it stays below 21000, a psychologically crucial level. A decisive breakout above 21000 might induce a resumption of the uptrend. Until then, we anticipate weakness over the near term.

Kunal Shah, Senior Technical & Derivative analyst at LKP Securities

The Bank Nifty index exhibited sideways momentum in the session preceding the RBI policy announcement. The lower-end support for the index is situated at 46500-46400, and as long as it maintains levels above this zone, the stance remains in a buy-on-dip mode. Immediate resistance on the upside is identified at 47000, and a decisive breakthrough at this level is anticipated to propel the index further upwards towards the 47500 mark.

Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher Pvt Ltd recommended buying three stocks today. These are;

- BUY MIDHANI at 395 stoploss 389 Target 414
-BUY OLECTRA GREEN at 1211 stoploss 1195 Target 1280
-BUY INDIAN BANK at 419 stop loss 413 Target 445

RBI Policy Expectations:

Kaushik Mehta, Founder & CEO of RUloans Distribution Services

As the Reserve Bank of India (RBI) is expected to maintain a cautious and potentially hawkish stance in the current financial year, impacting both home loans and personal loans (PL), it underscores a prudent approach to managing inflationary pressures. While this caution may pose challenges in the short term, it's crucial to recognize that the RBI's commitment to keeping interest rates unchanged provides stability to the entire lending landscape, instilling confidence among borrowers.

This approach, though more evident in its impact on personal loans, is considered a temporary measure. Looking ahead to the next financial year, there is optimism that the RBI's measures will contribute to a more favorable lending environment, with expectations of home loans outpacing personal loans. The central bank's dedication to economic stability, reflected in its reluctance to change rates, signals a steady trajectory. As borrowers navigate through this period, the stability in interest rates has positive implications for both home loans and personal loans, fostering an environment conducive to well-informed financial decisions, particularly with the housing sector anticipated to experience robust growth.

Vikrant Mehta, Head - Fixed Income, ITI AMC:

While we do not expect the RBI to indicate a "dovish hold" in this meeting, we do expect the Central Bank to tone down its hawkishness as the global environment is less hostile as compared to the previous policy review in October 2023. Additionally, markets will eagerly watch for cues on liquidity management and RBI open market operations.

Umesh Revankar, Executive Vice Chairman, Shriram Finance:

The RBI's 'State of the Economy' monthly bulletin for November acknowledged the robust festival-driven demand and positive consumer sentiment. It also mentioned the decline of inflation to 4.7% in October. These statements have kindled hope of a return to the declining rates regime. However, recently, the RBI raised risk weights on consumer credit, credit card receivables, and NBFC exposure, by 25 percentage points up to 125% ostensibly to control the liquidity in the system. It clearly indicates that the financial regulator, rightly so, is in no mood to let its guard down on inflation. However, these measures do have impact on MSME on-lending by NBFC's putting breaks on credit growth temporarily.

While the inflation numbers over the last few quarters have been encouraging, we agree with the RBI's view that our economy is still not out of the woods. Accordingly, we expect the MPC to maintain the repo rate at 6.5% as it aims to stabilise inflation around the 4% medium-term target by controlling the liquidity in the system. We further anticipate no rate cuts till the beginning of the next fiscal year.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.