Markets reacted with a positive bias to RBI’s third 50 basis points rate hike action. Domestic equities reversed their seven-day losing streak by the end of last week. Sensex and Nifty 50 both recovered heavy losses of the previous trading session on Friday as the rupee strengthened against the US dollar. Besides, there was also a slowdown in the outflow of funds from foreign investors. As expected, the RBI has once again increased the repo rate to control the rising inflation. Also, RBI’s confidence in the pace of growth of the economy fueled the overall appetite in the equity market. Many factors will affect the mood of the market this week.
Last week, the Sensex closed at 57,426.92 with a gain of 1,016.96 points or 1.80% on Friday. The Nifty 50 closed at 17,094.35, up 276.25 points or 1.64%. like heavyweight Reliance Industry, Bajaj Finance, Bajaj Finserv, HDFC Bank, Bharti Airtel, HDFC, Maruti Suzuki and ICICI Bank boosted the performance.
banking The stock emerged as the top bull, while consumer durables, auto, metal, capital goods and financial stocks added to the strong rally. Among the broader markets, midcap and smallcap indexes rose more than 1% each.
In the interbank forex market, Indian Rupee It closed at 81.40 against the US dollar on Friday, up 33 paise from its previous close of 81.73 against the dollar. Meanwhile, the outflow of funds by foreign investors (FIIs) has come down 1,565.31 crore at the end of September 30 as compared to outflow of Rs. 3,599.42 crore as on 29 September. Last week, FIIs made their biggest sell-off in the equity market for the month of September.
Before the RBI policy day, Indian markets were under selling pressure for seven consecutive days. The Sensex and Nifty 50 lost over 5.5% between September 21 and September 29 and climbed nearly 2% on September 30.
In the September 2022 policy, the RBI increased the repo rate by 50 basis points to 5.9%. As a result, the Permanent Deposit Facility (SDF) rate gets adjusted to 5.65%, while the Marginal Standing Facility (MSF) rate and the Bank Rate stand at 6.15%.
With the latest hike, RBI has now raised the key repo rate for the fourth time in a row. So far in the current financial year, the repo rate has increased by 190 basis points.
The six-member MPC also decided to focus on the return of housing to ensure that inflation remains within the target while supporting growth.
RBI has projected CPI inflation at 6.7% for the current fiscal, while real GDP growth is projected at 7% by the end of FY23.
What to buy from the markets between October 3-7?
Vinod Nair, Head of Research, Geojit Financial Services, said, “The Fed’s harsh approach to tame inflation through aggressive interest hikes was a misfortune for the domestic market bull-run. Although the domestic economy is bullish on solid fundamentals, But the stock market’s appetite for risk has been hampered by rising concerns of a recession across the globe.As the 10-yr yield spread between India and the US fell to a multi-year low, foreign investors exited the Indian market. This, coupled with increased interest in the dollar as a safe haven option, forced the rupee to trade at its all-time low. Domestic investors are turning to IT and pharma companies, which Have been in consolidation phase since last one year and are now benefiting from INR depreciation.
However, Nair said, “An in-line rate hike along with RBI’s confidence in the pace of economy’s growth helped the domestic market reverse the losing streak. Keeping inflation moderately low at 6.70%.” But a sound GDP prediction of 7.0% shows the resilience of the Indian economy”
According to Apoorva Sheth, Head of Market Perspectives, Samco Securities, with no major events expected in the next week, the global news flow may be dominated by the markets. US unemployment and household data such as manufacturing, deposit and credit growth numbers could weigh on investor sentiment next week. Volatility in oil prices and the strength of the US dollar against other currencies would be other important factors that could affect the market.
“Investors should keep an eye on stock-specific news,” Sheth said.
On Nifty 50, Sheth said, “Nifty ended the week with a fall of over 1%. It ended the week with a hammer candle, indicating that there is a possibility of a short-term correction. Daily RSI is also below 40. is starting to recover. Levels, indicating that the upward trend may resume soon. At monthly close, call writing near 17,000 strike indicates that this level is likely to act as massive support October is a bullish month for the markets on a seasonal basis. October out of the last 10, 8 times the market has ended on a positive note.As a result, traders should look for buying opportunities.
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