Why Indian stock market is rising after RBI policy meeting — explained

Stock market today: After weak opening in early morning session, Indian stock market witnessed sharp upside move after the announcement of RBI MPC meeting outcome. The RBI Governor Shaktikanta Das surprised India Inc and Dalal Street enthusiasts by keeping the repo rate unchanged at 6.50 per cent. As market was expecting 25 bps rate hike, key benchmark indices Sensex , Nifty and Bank Nifty cheered this RBI policy meeting outcome and turned green within few minutes. 

After hitting intraday low of 59,520, BSE Sensex today bounced back strongly and climbed to intraday high of 59,914 levels. NSE Nifty today climbed to intraday high of 17,617 levels after hitting intraday low of 17,502 mark. Nifty Bank index hit intraday high of 41,259 from its lows of 40,820 levels.

According to stock market experts, market was expecting 25 bps rate hike from RBI MPC meeting but RBI has preferred to growth instead of squeezing the money from the market to contain inflation, which is still beyond its targeted levels. They said that RBI's decision is going to fuel banking and interest rate sensitive sectors like auto, consumer durables, real estate, infrastructure, etc.

Why Nifty Bank reacted before Sensex, Nifty?

Speaking on why Indian stock market is rising after RBI MPC meeting, Avinash Gorakshkar, Head of Research at Profitmart Securities said, "Market was expecting 25 bps rate hike from RBI MPC meeting but the central bank of India has surprised both investors and observers by keeping interest rates unchanged. This is going to boost the economic growth and positively impact bank business as they would be able to sustain their business in near term. That's why Nifty Bank reacted ahead of Sensex and Nifty."

"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," said Santosh Meena, Head of Research at Swastika Investmart. The Swastika Investmart expert went on to add that market's overall tone has changed to positive in the near term. If you have cash then sell, and buy in the future.

"Technically, the crucial resistance levels for Nifty and Bank Nifty are 17600 and 41250, respectively. If they are successful in crossing over these levels, we can anticipate a move in the direction of the 17770 and 41650 levels; otherwise, some profit-taking is anticipated. On the downside side, immediate support levels are at 17440 and 40650. The texture is the buy-on dip," said Santosh Meena.

Stocks to buy now

“The decision to maintain the repo rate unchanged is a positive sign for the banking and NBFC sectors, and it is expected to benefit other sectors such as real estate and infrastructure,” said Sonam Srivastava, Founder at Wright Research.

Avinash Gorakshkar of Profitmart Securities said that banking, auto and consumer durable stocks are expected to lead the rally in short term. He advised investors to buy SBI, Canara Bank in PSU space while Axis Bank and ICICI Bank shares can be added for short term. He suggested Mahindra & Mahindra (M&M) stock in auto segment for short term.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.