The Indian equity benchmarks surged for fifth straight session on Thursday and staged a strong rebound from multi-month lows hit last month on the back of gains in heavyweights like Reliance Industries, HDFC, HDFC Bank, Larsen & Toubro and ITC. In the course of last five trading sessions, the Sensex has surged 2,219 points and Nifty 50 index has gained 647 points or 3.8 per cent.
Bullish business update by the country's largest private lender HDFC Bank helped banking stocks lead the rally on Dalal Street. Meanwhile, the country's most profitable company Reliance Industries announcing that it will hold the meeting to to discuss demerger of its financial services business led to buying in Reliance Industries in turn indicating bullish move for the markets.
On top of these bullish news updates, another shot in the arm for bulls came from the Rerserve Bank of India keeping the repo rate unchanged on Thursday and surprised the analysts who had penciled in 25 basis points rate hike by the central bank.
Citing 'turmoil in global economy and unprecedented uncertainty in geopolitics', RBI governor Shaktikanta Das maintained policy rates and added that the central bank remained watchful of the outlook and impact of policy measures on the broader economy.
The RBI was widely expected to raise rates by 25 basis points (bps) to take the repo rate to a seven-year high of 6.75%, and then pause for the rest of the year.
"Today’s RBI policy is surely a short-term relief for the market as Repo Rate remains unchanged at 6.50% post six consecutive rate hikes. However, inflation trends need to be closely watched. Keeping in view the FY24 inflation projection at 5.2% with CPI at 5.1% in Q1 FY24, inflation is still not out of the woods," Palka Arora Chopra, Senior Vice President at Mastertrust told Outlook Business.
"Passive investors can remain cautiously optimistic about the market. The key rationale behind the pause in rate hikes is improving global sentiments and moderating mounting inflation," Chopra added.
Foreign institutional investors turning net buyers in Indian markets for first time this year also kept bulls charged and provided strong momentum to markets.
FIIs bought shares worth Rs 7,936 crore in March after they consecutively sold shares worth Rs 28,852 crore in January and Rs 5,294 crore in February.
"The RBI astonished the market by pausing policy rates; nonetheless, there was some talk about this unexpected statement, which keeps it ahead of other major central banks across the world. When symptoms of growing inflation first appeared, the RBI was one of the few central banks to begin raising interest rates. As a result, this RBI approach can be interpreted as an indication that global interest rates are about to peak. The market is in a good mood, and this policy provides us with further cause to rejoice. However, given that we have witnessed a good recovery from recent lows and that we have a long weekend and a weekly expiry, some profit-taking or consolidation cannot be ruled out. The market's overall tone has changed to positive in the near term. If you have cash then sell, and buy in the future," said Santosh Meena, head of research at Swastika Investmart.
After a strong rally in the beginning of April analysts expect Nifty to test levels of 17,700 on the upside and Bank Nifty to test level of 41,650.
"Technically, the crucial resistance levels for Nifty and Bank Nifty are 17,600 and 41,250, respectively. If they are successful in crossing over these levels, we can anticipate a move in the direction of the 17,770 and 41,650 levels; otherwise, some profit-taking is anticipated. On the downside side, immediate support levels are at 17,440 and 40,650. The texture is the buy-on dip," Meena added.
