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Indian Equities Snap 7-day Losing Streak As RBI's Commentary Lifts Investor Sentiment

At Close, the Sensex was up 1,016.96 points or 1.80 per cent at 57,426.92, and the Nifty was up 276.20 points or 1.64 per cent at 17,094.30

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Indian equity benchmark indices snapped their seven-day losing streak on Friday as investor sentiment got a boost after Reserve Bank of India's (RBI) rate hike decision came on expected lines. 

The RBI hiked the benchmark interest rate by 50 basis points to 5.9 per cent and presented a strong commentary on India's growth prospects. Investors were also assured by the steps that the central bank will take to shield the domestic economy from global shocks.

At Close, the Sensex was up 1,016.96 points or 1.80 per cent at 57,426.92, and the Nifty was up 276.20 points or 1.64 per cent at 17,094.30.

On the Nifty, Hindalco Industries, Bharti Airtel, IndusInd Bank, Bajaj Finance and Kotak Mahindra Bank were among the top gainers while Shree cements, Asian Paints, Britannia Industries, Coal India and Dr Reddy’s Laboratories were the top losers.

All the sectoral indices ended in the green with auto, power, capital goods, bank, realty and metal up 1-2 percent.

BSE Midcap and Smallcap indices added 1 percent each.

RBI Governor Shaktikanta Das noted that while real GDP growth in Q1 FY23 (at 13.5 per cent) turned out to be lower than RBI’s expectations (16.2 per cent), the late recovery in kharif sowing, the comfortable reservoir levels, improvement in capacity utilisation, buoyant bank credit expansion and government’s continued thrust on capital expenditure are expected to support aggregate demand and output in second half of the fiscal.

On inflation Das said, “The recent correction in global commodity prices, including crude oil, if sustained, may ease cost pressures in the coming months. The inflation trajectory remains clouded with uncertainties arising from continuing geopolitical tensions and nervous global financial market sentiments."

“What lifted the market sentiment was the RBI's policy rate hike of 50 bps that came in as expected and its comment that India's economy remains on strong footing despite global headwinds. The relief rally was backed by investors' preference for growth-driving stocks from banking, automobile, realty & metal space. However, global macro factors will continue to dictate the domestic market sentiment going ahead as any fresh spell of negative news could once again trigger the downward spiral,” said Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities.

Banking stocks saw a surge post RBI's MPC outcome. Major players like Kotak Mahindra, Federal Bank, HDFC Bank, Bank of Baroda, Axis Bank, ICICI Bank and SBI surged between 1-5 per cent.

The Nifty Bank Index ended 2.61 per cent higher on Friday.

Investors are expecting higher loan demand to help banking companies to improve their margins. The recent rate hike is expected to divert more debt investment money towards banks.

Das also said that the central bank does not have any fixed exchange rate in mind and the rupee's movement against the US dollar has been orderly compared to other currencies.

“First, the rupee is a freely floating currency, and its exchange rate is market-determined. Second, the RBI does not have any fixed exchange rate in mind. It intervenes in the market to curb excessive volatility and anchor expectations," Das said.

On the Forex Reserves shrinking due to RBI’s intervention, Das said, “Our interventions in the forex market are based on continuous assessment of the prevailing and evolving situation...The aspect of adequacy of forex reserves is always kept in mind. The umbrella continues to be strong.” 

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