NEW DELHI: The Reserve Bank of India’s in-line monetary policy action brought a sigh of relief in Dalal Street. The benchmark indices, Nifty and Sensex, snapped their seven-day losing streak as the RBI delivered a 50 basis point repo rate hike and spoke highly about the resilience of the Indian economy against global headwinds.
The BSE Sensex closed the session at 57,427, up 1,017 points or 1.8%, while the NSE Nifty50 closed at 17,094, up 276 points or 1.64%. All sectors contributed to the move but it was banking and financials, which topped the gainers’ list.
According to market experts, there was no change in inflation target of 6.7% for the fiscal 2023, there was a minor tweak in the growth rate from 7.2% to 7% for FY23 despite severe global headwinds and RBI maintaining its “withdrawal of accommodation” stance led to rally post the policy announcement. The fall in the dollar index and no negative surprise by the RBI also supported the Friday rally.
“RBI’s commentary remains strong on fundamentals of Indian economy & they expect growth to re-bound in India ahead of its peers,” said Ashish Chaturmohta, Director and Head, Advisory Research - JM Financial Services.
Chaturmohta added that WTI crude have correcting sharply by nearly 30% from 120$ to 82 $ at present and non-oil commodities correcting by more than 20% in past few months bodes well for Indian economy & inflation outlook.
“This along with China +1 theme is extremely positive for Indian Economy. The upcoming festive & earnings season is likely to lift market sentiments with consumption stocks likely to stay in focus,” he said. Sampath Reddy, chief investment officer, Bajaj Allianz Life Insurance, said the RBI may be nearing the end of the rate hike cycle in India and future rate hikes will have more to do with supporting the Indian currency and also to some extent the inflation trajectory.
Both equity and bond markets have taken this in a positive stride and have rallied post the policy announcement, added Reddy. However, Yes Bank economists believe RBI may again increase rate by 35 bps in December 2022 and further by 25 bps in February 2023.