Equity, bond markets react positively to RBI’s MPC result

Adani Enterprises and Adani Ports led the Nifty with gains of 13.13% and 9.01%, respectively, while other group stocks such as Adani Transmission, Adani Power and Adani Wilmar gained up to 5%. Ambuja Cements, ACC and NDTV added to their gains with only Adani Total and Adani Green down 5% each.

Dheeraj Reilly, MD & CEO, HDFC Securities said, “Bond markets and equity markets responded well to the Monetary Policy Committee (MPC) outcome as the MPC was not as hawkish as most expected. The absence of a CRR hike was also a relief “

Experts said the RBI has taken a more optimistic view on domestic growth by raising the GDP forecast for FY24 cautiously keeping CPI inflation at 5.3%.

Meanwhile, global markets traded with hope as investors digested a speech by US Fed Chair Jerome Powell, who said deflation had begun but raised rates further in response to a strong job market. pointed out, said Vinod Nair, head of research at Geojit Financial Services.

With no negative surprises from RBI’s MPC meeting, investors’ buying continued in IT, banking and others.

Dwindling recession concerns following Powell’s comments on deflation also improved sentiment for IT services. Stock prices of other rate sensitive sectors including auto, consumer durables, realty also reacted well to the MPC outcome. Strong cues from the US market in overnight trade also boosted the market sentiment.

Sandeep Yadav, head-fixed income, DSP Mutual Fund said, “There was some expectation of RBI easing the stance or depending on the data. But the Governor’s statement did not take such views into consideration, which has led to G-Sec yield rising by 3 bps to 7.33%.”

Lakshmi Iyer, CEO-Investment Advisory, Kotak Investment Advisors Ltd. said that while the possibility of stagnation still remains, uncertainty may prevail and she expects range bound yield movement till then – oscillating between global data and domestic cues .

Rupee closes 20 paise stronger after policy announcement 82.49 against a dollar, which analysts attributed to dollar inflows.

With the repo rate held steady at 6.5%, the benchmark 10-year IGB yield is expected to trade in the range of 7.25 to 7.5% over the medium term, according to Edelweiss Mutual Fund. The fund house expects the sovereign yield curve to flatten in FY24 amid demand-supply dynamic at the long-end. Credit spreads are expected to widen gradually in FY24 amid continued increase in credit off-take and adverse liquidity conditions in global markets to raise funds.

Anindya Banerjee, VP of currency derivatives and interest rate derivatives at Kotak Securities Ltd, said RBI’s monetary policy was expected as the central bank hiked rates by 25 bps and maintained status quo on the stance. In the near term, we can see USDINR trading in the range of 82.40 and 83.00 on the spot.”

However, selling by foreign portfolio investors showed no respite. FPI which is already sold Year-to-date as of February 7 were net sellers of equity worth Rs 32,333 crore Equity of Rs 736.82 crore on Wednesday.

Rampant selling by FIIs is now the biggest drag on the market. In such a situation, traders will also use rallies to sell feel analysts.

Experts said intra-day volatility may continue due to uncertainty in global markets and concerns that central banks in major economies may maintain bullish stance going forward, which could trigger strong bouts of sideways movement.

“Nifty seems to have made a higher bottom on Feb 07 in the shorter term time frame. It may now face resistance from 17972-18016 band, while 17652-17721 band may offer support in the near term,” said Deepak Jasani, head of retail research at HDFC Securities.

In this context, analysts said investors should now buy high-quality stocks in growth sectors such as banking, IT, capital goods, telecom and cement and invest across sectors. Investing now by the patient will yield impressive returns in the medium to long term.