MUMBAI: The 12-bank Bank Nifty index rose a day ahead of the RBI’s policy meeting on fresh buying and short-covering by FIIs, said analysts, adding that the market had priced in a 20-25 bps reverse repo rate hike. A reverse repo is the rate at which RBI sucks out liquidity from the banking system.
Higher delivery-based trades were witnessed in Axis Bank, ICICI, IndusInd, and SBI from a day ago. For example, ICICI posted a delivery volume of 59.47% (versus 55.76% on Tuesday), ICICI 56.54% (51.44%) and SBI 35.47% (19.74%).
Furthermore, FIIs covered their outstanding bearish positions on index futures — Bank Nifty and Nifty — by 15976 contracts, resulting in the 12-constituent Bank Nifty outperforming the Nifty. Bank Nifty ended up 1.5% at 38610.25 against the Nifty’s and Sensex’s 1.14% rise each to 17463.8 and 58466.
The Feb 24 expiry Bank Nifty contract’s open positions declined by almost 6% as the contract rose 1.55%, a clear sign of short covering. Also, while FIIs sold a provisional Rs 893 crore worth of shares on Wednesday, DIIs purchased Rs 1,793 cr shares, causing frontline indices to rise. Investor wealth increased by Rs 2.46 lakh cr.
“Given the huge borrowing program of the Centre in FY23, RBI could keep rates unchanged at its meet tomorrow (Feb 10),” said Vishal Wagh, research head, Bonanza Portfolio. “This is positive for Bank Nifty, whose price is discounting a 20-25 bps hike in reverse repo either within or outside of the MPC.”
The FII sales have been balanced by domestic investor inflows. Net inflows into mutual funds’ equity-oriented schemes stood at Rs 14877.77 crore, up for the 11 straight months, Amfi data showed. Debt-oriented schemes attracted net inflows of Rs 5,088 crore in January.