Reliance and IT Stocks Lead Gains; RBI Keeps Key Rates Unchanged

Nifty, +2.1%; Sensex, +2.2%; Nifty Midcap, +3.4%; Nifty Smallcap, +3.7%; Model Portfolio, +4.3%.

Market Pulse: Confirmed Uptrend

Distribution Day Count: Three

Nifty started the week on a positive note. It traded lower on Wednesday following global cues, but rebounded on Thursday and continued its momentum today as well. It did not add a distribution day this week. Nifty is trading 1.5% and 5% above its 21- and 50-DMA, respectively. The broader market outperformed the benchmark indices during the week. This week, crude oil price rose to almost $83 per barrel and the INR depreciated to 75 per USD.

On the sectoral front, on a weekly basis, Nifty Auto, IT, and Energy closed 4–4.5% higher. Nifty Realty gained 3%, while Nifty Bank, Metal, and Financial Services advanced 0.5–1.5%. On the flip side, Nifty FMCG (-1%) and Pharma (0.5%) closed lower. Today, the advance-decline ratio favored the advancers. Of 2,055 stocks traded, 1,059 stocks advanced, 910 declined, and the remaining closed flat.

RBI today maintained the status quo, keeping the repo rate unchanged. Consequently, the policy repo rate remains unchanged at 4%. The stance remains accommodative as long as necessary to revive and sustain growth. The reverse repo rate also remains unchanged at 3.35%. The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25%. The central bank revised its FY22 CPI inflation projection to 5.3% from 5.7%. It maintains FY22 GDP growth forecast at 9.5%.

The distribution day count currently stands at three. Further, Nifty is trading above all its key moving averages. We would like the index to continue trading above its key moving averages. After such a sudden rally, one must also be prepared for some mild pullback and profit booking. In the process, if the index adds a couple of distribution days, stages a reversal, or breaches its key moving averages, we may change the market status to an Uptrend Under Pressure. Reducing exposure to stocks breaking below their 21- or 50-DMA on higher volume is important.

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