By Ananya Grover & Nesil Staney
Gains in the shares of financial companies following the Reserve Bank of India announcement of an additional 25 basis points cut in the repo rate than what was priced in led the outperformance of Indian equity benchmarks on Friday. Nifty Bank touched new all-time high of 56,695 with most constituents rising.
The Nifty 50 reclaimed its 25,000-mark after eight sessions post a recovery of around 360 points intraday. It finally settled 252.15 points higher at 25,003.05. BSE’s Sensex closed at 82,188.99, its two-week high. Only four of the Nifty 50 stocks ended lower. HDFC Bank, Bajaj Finance, Axis Bank, and Mahindra & Mahindra contributed the most to the gains in the Nifty 50. Among broader indices, while BSE Smallcap rose only 0.4% to 53,440.26 points, BSE Midcap closed 0.9% higher at 46,096.51 points.
Calling the policy decision a “very welcome move”, Shankar Sharm, founder, Gquant said, “This is going to act as a decent propellant for growth, which wasn’t looking too great, given tariff wars and a general local consumption slowdown.”
Akhil Puri, Partner, Financial Advisory, Forvis Mazars in India said while financial services could face short-term margin pressures, stronger credit offtake and improved asset quality should support medium-term gains, infrastructure and capital goods may see a revival in private capex if transmission remains smooth.
Sandeep Bagla, CEO of TRUST Mutual Fund noted MPC frontloaded the rate cuts, reducing repo rates by 50 bps and also cut CRR by 100 bps. “These measures came as a positive surprise to equity markets as there will be greater impetus to growth and there could be faster pick up in the interest rate sectors,” he said adding that oddly, RBI also changed its stance from accommodative to neutral, thereby signaling that further softening of monetary conditions may not be easily forthcoming. “It is complex messaging from the RBI where they have eased the policy rates and liquidity but made no promises for the future,” he said.
According to Manish Kothari, CEO, ZFunds, “This reduces the attractiveness of traditional fixed income instruments, especially for risk-averse investors and they may look for alternative avenues to preserve and grow their capital, making mutual funds a more appealing option”.
Other Asian markets assessed the phone call between US and China presidents on Thursday which Donald Trump’s post said yielded a very positive conclusion for both countries. Indices of Australia and Hong Kong ended lower, and Japan’s Nikkei closed 0.5% up. In Europe, stock indices were mixed and traded with little change and those US futures traded 0.2%-0.3% higher in the early trade.