Stock markets rally on RBI’s status quo move on interest rates

Mumbai: Benchmark equity indices Sensex and Nifty rallied for a second straight session on Friday after the Reserve Bank maintained the status quo on policy rates, resulting in gains for rate-sensitive sectors like financial, realty and auto. A firm trend in Asian and European markets also bolstered the investors' sentiment, traders said.

The 30-share BSE Sensex climbed 364.06 points or 0.55 per cent to settle at 65,995.63. During the day, it jumped 464.24 points or 0.70 per cent to hit 66,095.81. The Nifty advanced 107.75 points or 0.55 per cent to end at 19,653.50. On the weekly front, the BSE benchmark climbed 167.22 points or 0.25 per cent, and the Nifty was up 15.2 points or 0.07 per cent.

"The risk of higher inflation led the RBI to become more realistic in their policy approach. The central bank maintained a hawkish tone on liquidity management, as they may consider OMO to contain liquidity in the system, which led to India's 10-year yield inching higher. "The market, however, reacted positively, as the status quo on the growth rate and a further drop in oil prices provided near-term support," said Vinod Nair, Head of Research at Geojit Financial Services.

Among the Sensex firms, Bajaj Finserv jumped nearly 6 per cent, and Bajaj Finance climbed nearly 4 per cent. Titan surged 2.98 per cent, followed by IndusInd Bank, ITC, JSW Steel, Infosys, Tech Mahindra, Tata Consultancy Services and Maruti. Hindustan Unilever, Asian Paints, Bharti Airtel and HDFC Bank were among the laggards. In the broader market, the BSE midcap gauge jumped 0.66 per cent and smallcap index climbed 0.56 per cent.

"Realty shares hogged the limelight after taking the hammering in recent trades amid hopes that no change in interest rates may boost home sales, especially during the festive season," Amol Athawale, Vice President - Technical Research, Kotak Securities Ltd, said. Among the indices, realty rallied 3.01 per cent, consumer durables jumped 1.47 per cent, services (1.12 per cent), IT (0.71 per cent) and consumer discretionary (0.63 per cent). Telecommunication emerged as the only laggard.

The Reserve Bank of India expectedly left its key interest rate unchanged on Friday as inflation remains a major risk, and signalled it would keep liquidity tight using bond sales to bring prices closer to target. The monetary policy committee, which has three members from the central bank and a similar number of external members, held the benchmark repurchase rate (repo) at 6.50 per cent in a unanimous decision for the fourth consecutive meeting in a row. It retained a 'withdrawal of accommodation' stance.

"Global shares mostly rose on Friday in guarded trading ahead of a report on the US jobs market due Friday. Economists expect it to show hiring slowed to a pace of 1,63,000 jobs added in September from 1,87,000 in August. "Investors worry that too strong a US job market could add to upward pressure on inflation and pressurise the US Fed to keep rates higher for longer," said Deepak Jasani, Head of Retail Research, HDFC Securities.

In Asian markets, Seoul and Hong Kong ended in positive territory while Tokyo settled lower. European markets were trading in the green. The US markets ended marginally lower on Thursday. Global oil benchmark Brent crude declined 0.02 per cent to USD 83.94 a barrel. The BSE benchmark had climbed 405.53 points or 0.62 per cent to settle at 65,631.57 points on Thursday. The Nifty had advanced 109.65 points or 0.56 per cent to end at 19,545.75 points.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,864.20 crore on Thursday, according to exchange data.