Stock Watch: Euphoria
By Amit Sinha*
Weekly Insights – Technical
03 April – 06 April
Indian Stock Market Indices status as of day closing April 06, 2023:
Sensex: 59,832 (+143.66) +0.24%
Nifty 50: 17,599 (+42.10) +0.24%
Nifty Bank: 41,041 (+41.85) +010%
Indian Stock Indices as expected, continued on their upswing in the last week which was truncated on account of 3 holidays, and the Reserve Bank of India’s decision to pause any hike in the repo rate resulted in euphoria. The market had already factored in an increase of 0.25 basis in the repo rate and when the RBI in its monetary policy statement on April 6, 2023, mentioned pausing the repo rate hike, which now remains unchanged at 6.5%, euphoria crept in the market.
The last trading session on Thursday, April 6, 2023, ended with the FIIs (Foreign institutional investors) buying in equities worth Rs 475.81 crore whereas DIIs (Domestic institutional investors) sold Rs 997.08 worth of equities on the last trading day session.
Will the euphoria sustain?
The RBI policy appears to be a hawkish pause as the MPC (Monetary Policy Committee) turns data-dependent whilst it awaits the monetary efficacy from prior rate hikes to play out into the deposit and lending rates. With the RBI Governor stating that today’s pause on policy rates is for this policy only, it has the elbow room to act on rates if inflation readings surprise on the upside, said Achala Jethmalani, Economist, RBL Bank. Basis the current growth-inflation dynamics and the global backdrop, the repo rate is likely to peak out at 6.50-6.75% with a possibility of a final 25bps to be delivered in 1H FY24, Jethmalani added.
After six consecutive hikes since May 2022, which raised the repo rate by 250 basis points, this decision offers relief to borrowers who can expect no increment in home loans and other EMIs in the near future. This decision also indicated that the Indian Banking system is sound and healthy as of now. However, as the RBI Governor spelt out, given its current level, the present policy repo rate can only be regarded as accommodative in light of inflation which is above the target.
RBI estimates
GDP
FY24 6.5%
Q1 FY24 7.8%
Q2 FY24 6.2%
Q3 FY24 6.1%
Q4 FY24 5.9%
Inflation
FY24 5.2%
Q1 FY24 5.1%
Q2 FY24 5.4%
Q3 FY24 5.4%
Q4 FY24 5.2%
US Stock Market – The banking crisis situation has more or less calmed after the dramatic collapse of Silicon Valley Bank (SVB) and Signature Bank last month. The US authorities including the treasury department had to step in boldly and take decisions to uplift the rattled industry. Now, there seems less risk of any contagion effect and therefore not many negative cues from the US Stock market. US Treasury Secretary Yellen told AFP (Agence France-Presse) in an interview on Thursday, April 6, 2023: “I continue to anticipate that the US economy will grow and the labour market will remain strong, and inflation will come down.”
Nifty50 chart on Weekly Time frame as on April 6, 2023 (closing)
Next Week Market / Trading Session Outlook
Indian Stock Market – Bulls have consolidated their grip and are looking stronger in each trading session on daily time frame. With the latest positive RBI policy statement on the last trading session of Thursday, the market went up considerably however the market also saw some profit booking in the later half session due to the weekly expiry trading session in derivatives.
The market can expect the stock prices to rise higher from here on; on major large caps particularly. Mid-caps and Small caps also would regain their strength in the positive momentum and environment.
Disclaimer: The opinions expressed within the content are solely the author’s (not a SEBI registered advisor) and do not reflect the opinions and beliefs of the website or its affiliates. You should consult a qualified broker or an independent financial advisor before making any investment.
*The writer is a long-term investor/trader. The views expressed are personal.
