 "Nifty tops 21K on RBI boost; Indices rise amid hopes of better eco growth")
Indian equity benchmarks logged fresh highs on Friday after the Reserve Bank of India (RBI) revised gross domestic product (GDP) projections while maintaining the status quo on interest rates.
The Sensex ended the session at 69,826, gaining 304 points or 0.4 per cent. The Nifty crossed the 21,000 mark for the first time and ended the session at 20,969, gaining 68 points or 0.3 per cent. For the week, both Sensex and Nifty gained 3.5 per cent. Both posted their longest weekly gaining streak since January 2021.
The RBI on Friday raised its GDP forecast for the current financial year to 7 per cent from 6.5 per cent earlier. The RBI’s revised estimates came after better-than-expected growth during the July-September quarter. However, it kept its benchmark repo rates unchanged at 6.5 per cent amid uncertainty regarding the inflation outlook.
“The RBI took a balanced approach by raising the economic growth forecast and expressed concern about food inflation, which may have an elevated trajectory in the short term. A fall in rabi sowing and dipping reservoir levels provide a perception that foodgrain prices can rise. The impact was visible on FMCG stocks, which underperformed on Friday,” said Vinod Nair, head of research at Geojit Financial Services.
Stock markets got a boost for the last two weeks due to strong macro numbers, the Bharatiya Janata Party’s (BJP’s) win in three key states, and jobs data from the US, which raised bets for rate cuts.
GDP data for the September quarter released last week showed the Indian economy expanded by 7.6 per cent, beating the central bank’s estimate of 6.5 per cent. The purchasing managers' index (PMI) for manufacturing rose to 56 in November, up from 55.5 in October. A figure above 50 indicates expansion.
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The BJP’s win in three state elections raised hopes of policy continuity, prompting investors to raise bets on stocks that are likely to gain from the economic growth.
Meanwhile, the US Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) report showed that there were 1.34 vacancies for every unemployed person in October, up from 1.47 in the previous month.
The falling number of jobs was a sign that higher interest rates dampened worker demand.
The job numbers, along with a statement from a European Central Bank official on softening inflation, have renewed hopes that rate cuts by major central banks are on the anvil.
However, market experts are cautioning investors against irrational exuberance vis-a-vis rate cuts.
US Federal Reserve officials have stressed that though they are done hiking interest rates, any talks of a rate cut at the moment are premature. The market trajectory next week will depend on the monetary policy announcement of the Fed.
“Rotational buying across heavyweights is fuelling the up move, and we see the same trend continuing. In case of any dip, Nifty will likely hold the 20,700-20,800 zone while profit-taking may re-emerge around the 21,200 level. Traders should stay focused on stock selection, prefer banking and IT for long trades, and pick selectively from others,” said Ajit Mishra, senior vice-president-technical research at Religare Broking.
The market breadth was weak, with 2,077 stocks declining and 1,679 advancing. Close to two-thirds of Sensex stocks were gainers. HDFC Bank rose 1.4 per cent and contributed the most to Sensex gains, followed by Infosys.