New Delhi On Wednesday, for the fourth consecutive day, the stock market closed with a decline of 0.37% and 0.39% in Nifty and Sensex. The move by the Reserve Bank of India to raise the repo rate by 50 basis points came on expected lines, while the absence of an increase in the cash reserve ratio (CRR) was a positive move for the markets.
This led to some recovery in the indices from the day’s lows. However, markets could not sustain gains due to a focus on global markets, said analysts who expect the US Federal Reserve’s policy to intensify next week. Rising crude oil prices, selling by foreign institutional investors and depreciating rupee also weighed on concerns.
“The absence of fresh negatives following the announcement of the outcome of the Monetary Policy Committee (MPC) meeting resulted in a relief rally in equity and bond markets. However, this rally was used by investors/traders to lighten their positions,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
Attention has shifted to upcoming central bank meetings in Europe and the US. The fall in European stocks on Wednesday was attributed to investors following Thursday’s meeting of the European Central Bank (ECB) for a meeting of the US Fed next week. Analysts say there are concerns that a tightening of the central bank will affect global growth.
Experts said the bond market reacted positively as RBI’s policy measures were on expected lines and without any negative surprises. This gave a relief to the bond market. Amar Ambani, Head, Institutional Equities, Yes Securities said the 50 bps hike in the repo rate was included in the 10-year yield, which had gone up from 7.5% before the policy outcome, to just short of 7.45%. to withdraw.
RBI Governor Shaktikanta Das refrained from providing any further guidance on the terminal repo rate, which is the level of the repo rate at the end of the rate hike cycle, apart from announcing any further liquidity reduction measures. Edelweiss AMC said the bond market interpreted this as a “faulty signal”.
Aditi Nair, chief economist at ICRA, said the comments on the systematic completion of the government borrowing program have also acted to cool the 10-year G-Sec yield.