Markets eke out slim gains post RBI rate hike; close higher for the week

PTI

Mumbai, August 5

Equity benchmarks ended modestly higher on Friday after the Reserve Bank raised the key interest rate on expected lines to cool stubbornly high inflation and defend the rupee.

Continuous foreign fund inflows into the capital markets and softening crude oil prices also helped the bourses regain momentum after a day’s pause, traders said.

The 30-share BSE Sensex ended 89.13 points or 0.15 per cent higher at 58,387.93 after facing volatility during the fag-end of trade. During the day, it climbed 350.39 points or 0.60 per cent to 58,649.19.

Similarly, the broader NSE Nifty went up by 15.50 points or 0.09 per cent to finish at 17,397.50.

The Reserve Bank on Friday raised the key interest rate by 50 basis points to 5.40 per cent—the third straight increase since May. With the latest hike, the repo rate or the short-term lending rate at which banks borrow has crossed the pre-pandemic level of 5.15 per cent.

Reserve Bank of India (RBI) Governor Shaktikanta Das also signalled that the hike was not the end of the rate tightening regime and more may come to tame inflation that has stayed above its upper tolerance limit of 6 per cent for six months.

The central bank, however, did not revise its existing economic growth or inflation forecast despite indications of a global slowdown, recessionary conditions in the developed economies, and the moderation already witnessed in commodity prices.

“The 50 bps rate hike by the Reserve Bank of India today is broadly in line with the consensus expectations,” said Sujan Hajra - Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers.

UltraTech Cement was the top gainer among the Sensex constituents, climbing 2.86 per cent, followed by ICICI Bank, Bharti Airtel, PowerGrid, Infosys, Wipro and Axis Bank.

On the other hand, Mahindra & Mahindra was the biggest laggard with a decline of  2.04 per cent after its Q1 results came below expectations.

Maruti Suzuki, Reliance Industries, IndusInd Bank, Bajaj Finserv, SBI and Tata Steel were among the other prominent losers.

On a weekly basis, the Sensex advanced 817.68 points or 1.42 per cent, while the Nifty gained 239.25 points or 1.39 per cent.

“With the overhang of monetary policy now behind us, the geo-political tension between China & Taiwan will be in focus, as any flare up in the region may lead to panic situations across the globe,” said Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities Ltd.

In the broader market, the BSE smallcap gauge gained 0.23 per cent while the midcap index inched up 0.09 per cent in Friday’s session.

Among the BSE sectoral indices, telecom jumped 1.34 per cent, followed by basic materials (0.89 per cent), teck (0.82 per cent) and IT (0.72 per cent).

Utilities, auto, power and consumer durables lost up to 1.86 per cent.

Global markets were mixed as investors digested corporate earnings ahead of US jobs data.

In Asia, markets in Seoul, Shanghai, Tokyo and Hong Kong ended in the green.

European stocks were trading lower during mid-session deals. The US markets had ended on a mixed note on Thursday.

Meanwhile, international oil benchmark Brent crude went higher by 0.18 per cent to USD 94.29 per barrel.

The rupee appreciated by 17 paise to close at 79.23 (provisional) against the US dollar on Friday.

Foreign institutional investors remained net buyers in the capital markets as they bought shares worth Rs 1,474.77 crore on Thursday, as per exchange data.

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