The equity benchmarks extended gains for the second straight session on Friday, helped by the Reserve Bank of India’s decision to cut the repo rate by 25 basis points to 5.25% while maintaining a neutral stance.
The Nifty 50 rebounded from an intraday low to close at 26,186.45, up 152.70 points or 0.59%, while the BSE Sensex advanced 447.05 points or 0.52% to 85,712.37. Banks and financial services stocks led the rise. After a roller-coaster activity, the Nifty for the week ended 0.08% lower, while the Sensex was flat, down by 5 points.
What did Pratik Gupta say?
“The 25bps repo rate cut and liquidity infusion directly influence market confidence by addressing growth, liquidity, and INR stability concerns, which are key for investor outlook,” said Pratik Gupta, CEO & Co-Head, Kotak Institutional Equities. Ashish Gupta, CIO, Axis Mutual Fund, added, “The RBI’s move to provide additional liquidity and upgrade GDP forecasts is a positive signal, especially for financial sector stocks.”
Meanwhile, broader markets underperformed, with the BSE Mid-Cap index slipping 0.19% and the BSE Small-Cap index down 0.32%. Market breadth was weak, with declines outnumbering advances, though volatility eased, with the India VIX falling 4.64% to 10.32.
Sectoral action presented a mixed result
Sectoral action was mixed, with PSU Banks, IT, Financial Services and Metals leading the gains, while Media, FMCG, Energy and Pharma ended on a weaker note.
Buying interest strengthened in financials as lower borrowing costs typically spur credit demand and ease funding pressures. Nifty Financial Services rose 1.2%, while the Bank Nifty and PSU Bank indices gained 0.8% and 1.5%, respectively. The auto index also advanced 0.8%, aided by improved affordability for vehicle financing.
Defence-related stocks also remain in focus as Russian President Putin meets with PM Modi at the annual summit aimed at deepening defence and trade ties.
Meanwhile, FIIs continued to be net cash sellers to the tune of Rs 439 crore on Friday. So far in December, they have been sellers to the tune of Rs 8,770 crore. Most global equity markets performed strongly in the past week, while India was among the major underperformers on a US dollar basis. Global markets continued to see a strong rally, driven by renewed optimism around a rate cut in the US in December and continued recovery in AI stocks.
Going ahead, markets are expected to consolidate with a positive bias, supported by the RBI’s rate and liquidity actions, steady domestic flows and rising expectations of a potential US Federal Reserve rate cut, says traders. “We expect the market to remain range-bound in the short term until there is clarity on the India-US trade deal or on other economic reforms being pushed through,” said Gupta of Kotak. Echoing the same, Gupta of Axis Mutual Fund stated that the “Large IPO and equity stake pipelines even for December, though, continue to be an overhang.”