RBI Keeps Rates Unchanged; Nifty Gains, IT Stocks Outperform

Nifty, +0.9%; Sensex, +1%; Nifty Midcap, +1.1%; Nifty Smallcap, +0.4%; Model Portfolio, +0.7%

Market Pulse Confirmed Uptrend

After a gap-up opening, Nifty moved sideways in the first half. In the second half, Nifty resumed positive momentum and made a high of 11,255. After a volatile move in the last two hours, Nifty closed 90bps higher. Volume was lower compared with yesterday’s session. Nifty Midcap advanced more than 1%, while Smallcap closed 0.4% higher. Market breadth continues to remain skewed toward advancers. Of 2,161 stocks traded, 1,120 advanced, 703 declined, and the remaining traded flat. On the sectoral front, Nifty IT (+1.7%) led the gains. Nifty FMCG, Pharma, Financial Services, and Metal also closed 1.0–1.5% higher.

RBI, in its MPC meeting, maintained repo rate at 4%, reverse repo rate at 3.35%, and accommodative stance. According to RBI, inflation pressure was evident across subgroups through July. It said that as the MSME borrowers are facing stress on account of the economic fallout of the pandemic, lending institutions may restructure the debt under the existing framework, provided the borrower’s account was classified as standard with the lender as on March 1, 2020. This restructuring shall be implemented by March 31, 2021. RBI said that the real GDP growth may remain in a negative zone in the first half of FY21.

The Indian market remains in a Confirmed Uptrend. We would like to see fresh names flexing their muscles for a sustainable rally. Finding favorable entries into powerful breakouts may be the best use for new money in the current market. However, things can change quickly due to high volatility. We are operating in an uncertain environment where information is distributed unevenly, wherein outside forces, either intentionally or unintentionally, affect prices across various time frames. We will continue to monitor the behavior of market and keep an open mind as to how it unfolds.