Benchmarks fly high on RBI’s rate hike, relief rally triggered by Governor’s positive commentary

• Benchmark indices rallied furiously after a seven-day losing streak.
• The Sensex closed 1,016 points higher at 57,426 while the Nifty50 sailed past the 17,000 mark to close 276 points higher.
• All thanks to an optimistic commentary by the Reserve Bank of India regarding India being in a better position to balance growth and inflation compared to other advanced economies.
• Das mentioned that economic activity in India remained stable, which gives the central bank confidence in dealing with current challenges.

The Indian equity market on Friday ended on a positive note, after seven straight sessions of global markets-tracking losses. What helped was the optimistic commentary by the country’s central bank governor about India being in a better position to witness growth than any other advanced economies.

The benchmark indices rallied fearlessly, breaking their seven-day losing streak. The Sensex closed 1,016 points higher at 57,426 while the Nifty50 went above the 17,000 mark, ending 276 points higher.

"What lifted the market sentiment was the RBI's policy rate hike of 50 bps that came in as expected and its comment that India's economy remains on a strong footing despite global headwinds. The relief rally was backed by investors' preference for growth-driving stocks from banking, automobile, realty and metal space,” said Amol Athawale, deputy vice president - technical research at Kotak Securities.

However, he added that global macro factors will continue to dictate the domestic market sentiment going forward.

The Reserve Bank of India Governor Shaktikanta Das on Friday announced a 50 basis points hike in a key policy rate, largely in line with the market’s estimates. This takes the repo rate to 5.9%. With this, the RBI has hiked the key policy rate by 190 bps since May to tackle rising inflation which is hovering around 7%.

“The Indian equity market witnessed a sharp bounceback after a seven-day fall. The fall in the dollar index and no negative surprise by the RBI led to a strong short-covering in the market,” Santosh Meena, head of research at Swastika Investmart.
All sectoral indices were trading in the green after the RBI’s commentary on the Indian economy. “Soft landing is meant for advanced economies. For India, it is a take off,” said Michael Patra, deputy governor, RBI at a press conference on Friday.

RBI Governor Das mentioned in his speech that economic activity in India remained stable, which gave the central bank confidence in dealing with current challenges. He added that despite these issues, the Indian economy continued to be resilient.

“The 50 bps hike by the RBI was expected, especially since no global economy has hinted towards any kind of moderation. Inflation continues to ravage almost all economies, and India is no exception,” said Anuj Puri, chairman at Anarock Group. The BSE Sensex opened 175 points lower at 56,213 while the Nifty50 was down 53 points at 16,773 on opening.

The market has been on a losing streak for the last seven sessions thanks to selling pressure in the equity market by foreign institutional investors (FIIs), who sold ₹3,750 crore in September.

“Post RBI’s commentary, Nifty bounced in green and gained strength throughout the session. The rally was especially seen in banking sector stocks. This has also given some support to falling rupee which had depreciated by 7% since April,” Siddhartha Khemka, head - retail research at Motilal Oswal Financial Services said.


SEE ALSO: RBI hikes repo rate by 50 bps, taking it to a three-year high of 5.9% – Das says inflation at ‘alarmingly high levels’ across jurisdictions
RBI’s interest rate hikes not over yet, but intensity might come down
Real estate demand may take a hit this festive season after RBI’s rate hike