Dalal Street recovers on dovish RBI policy

The markets made a smart recovery in this volatile week to emerge unscathed from mixed global cues as firm domestic signals kept investors assured of the India growth story. The benchmark indices gained around 0.7% this week, as buying from foreign and domestic institutions helped markets post their tenth weekly gain in the last 11 weeks.

The BSE Sensex closed the week at 17694.20, up 103.20 points or 0.59% while the Nifty gained 41.50 points (0.79%) to close above the 5300 mark at 5304.10. The broader indices continue to outperform the benchmark indices as the BSE Mid-cap and BSE Small-cap indices gained 1.55% and 2.03%, respectively compared with a 0.75% rise in the BSE-100 index.

The week saw divergence in global market movements as domestic markets closed the week in the green, while many big Asian markets such as Shanghai, Hang Seng and Nikkei ended with losses. “The belief in domestic economic growth along with no major euphoria is keeping the markets stable. However they are in a dicey state with lot of action seen on account of global cues” said Sandeep Singhal, head (derivatives) at Emkay Global Financial Services. The banking sector was the flavour of the week after the RBI took a dovish stance in its annual policy meet, to protect growth by hiking the key interest rates just 25 basis points (bps) as against the market expectations of up to a 50 bps hike.

The BSE Bankex gained 4.93% over this week. State Bank of India (SBI) was the major winner gaining 10.4% with other banks like Axis (up 7.62%), ICICI (up 5.99%) and PNB (up 3.69%) also contributing to a rise in the Nifty.

Public sector banking stocks also got a boost from the union cabinet’s approval to infuse Rs 15,000 crore this fiscal. Mid-cap PSU banking stocks like Andhra Bank, Bank of India, Indian Overseas Bank, Syndicate Bank and IDBI Bank gained close to 5-7%. Besides, rate-sensitive sectors like auto (up 2.40%) and realty (up 1.39%) were the other major gainers. All sectoral indices ended in green except for metals, IT, telecom and media which lost close to 2-3% this week. Among metals, Tata Steel, Sterlite Industries, JSW Steel and Sesa Goa were the major losers ending the week 6-7% down.

The week started with markets on a weak note due to negative cues on account of the Goldman Sachs issue. However, the markets discounted the news the very next day as the RBI policy lifted sentiments on Tuesday. The market continued its positive run in the last four days as institutional buying helped offset Monday’s losses. FIIs pumped close to Rs 1,600 crore this week, while mutual funds also joined in the party — buying shares worth Rs 215 crore in the four sessions up to Thursday.

Going ahead, experts believe markets would remain rangebound in the short term, though there is tough resistance on the upside.

“Global cues especially from Greece continue to be a show-spoiler for markets. Markets would remain in 5200-5400 range, but the fact that there is lot of resistance at 5400 levels and also that the 5200 levels have been violated, indicate a bit of weakness.” said Pankaj Pandey, head (research) at ICICI Direct.
“The immediate support for markets is at 5180-5200 levels. As long as we are above this range, markets would remain firm,” said Singhal.