Dalal Street snaps 4-day winning streak as subdued RBI commentary on inflation weighs

• The Sensex fell by 294 points to close at 62,848 while Nifty50 fell by 91 points to 18,634
• RBI Governor Shaktikanta Das said that the Monetary Policy Committee has decided to hold the repo rate for the second time running.
• The RBI’s MPC has kept its policy stance at ‘withdrawal of accommodation’ with focus on bringing inflation down to 4%.

The stock markets on Thursday posted early gains after the Reserve Bank of India’s Monetary Policy Committee kept the key lending rate unchanged. However, they surrendered early gains to close down 0.5% as subdued RBI commentary on inflation weighed on sentiments.

The Sensex fell by 294 points to close at 62,848 while Nifty50 fell by 91 points to 18,634.

Kotak Mahindra Bank was the biggest loser on the Sensex, sliding 2.6%. This was followed by Tech Mahindra, Mahindra & Mahindra, Axis Bank, Hindustan Unilever, Tata Motors, Tata Consultancy Services, Bajaj Finserv, Bajaj Finance, Nestle and Titan.

NTPC, Power Grid, Larsen & Toubro, HDFC, Reliance and HDFC Bank were among the gainers.

“Sharp correction in the last hour trade pulled down the Sensex below the 63000 mark, as realty shares faltered sharply after the recent upsurge. While rate hike pause by the MPC was on expected lines, subdued commentary by the RBI on inflation for this fiscal year dampened the sentiment. Technically, on daily charts, the Nifty has formed a long bearish candle, which indicates further weakness from the current levels,” said Shrikant Chouhan, head of research (retail) at Kotak Securities, adding that the medium-term formation of the index is still in to the bullish side.

The RBI has kept its lending rate, or the repo rate, unchanged at 6.5% and maintained its policy stance of remaining focussed on “withdrawal of accommodation”.

Moreover, RBI governor Shaktikanta Das insisted repeatedly that the goal of the central bank is to bring inflation down to 4% in the long run. In this financial year, the reading is unlikely to come below 5% with the projection shaved by only 10 bps in the policy.

“The policy repo rate has been raised by 250 basis points since last May and they are still working their way through the system. The fuller effects will be seen in the next few months,” Das said in his speech on Thursday.

The RBI also expects India’s GDP to grow at 6.5% in 2023-24, with risks evenly balanced. It estimates the headline inflation for FY24 at 5.1%, which is above RBI’s target of 4%. The inflation situation is evolving, the governor said, with monsoon predictions and the effects of the El Nino phenomenon.

“From the equity markets point of view, it is quite clear that the rate hike cycle is over (unless there are major global dislocations) and current policy will not cause any hiccups to the growth trajectory that the country is on. Most of the domestic indicators are looking positive; credit growth despite coming off a high base should also remain resilient and current policy stance will not derail that trajectory,” said Christy Mathai, fund manager - equity at Quantum AMC.

On Thursday, gold prices fell ₹38 to ₹59,465 per 10 grams in futures trade as speculators reduced their positions. On the Multi Commodity Exchange, gold contracts for August delivery traded lower by ₹38 or 0.06% at ₹59,465 per 10 grams in a business turnover of 14,330 lots.

The rupee also fell 5 paise to close at 82.57 (provisional) against the US dollar on Thursday. At the interbank foreign exchange, the domestic unit opened at 82.59 against the dollar, and finally settled at 82.57 (provisional), down 5 paise from its previous close amid a negative trend in domestic equities.

(With PTI inputs)

$NIFTY50.NSE What seems high and risky to majority generally goes higher - William O'Neil. 1. This is in the process of forming a cup and handle pattern. 2. The handle retracement seems to be perfect between 50-61.8% retracement levels. 3. Remember we are ~144% up from 2020 lows. So this is a trend continuation pattern. 4. Wider cup, wilder run post breakout. Target will be handle depth first then cup depth. 5. If the cup and handle completes, Stan Weinstein concepts also will trigger. PS: This will all be true after the breakout. On lower time frame it is still looking good. You might also enjoy looking into NIFTY weekly of period between 2nd Feb-2015 to 27th Feb-2017.

— (@RishiPr92) June 08, 2023