Nifty reclaims 200 simple moving average at 16,983 post RBI policy

Mumbai: Benchmark share indices extended gains to 1.8% each post the Reserve Bank of India's decision to hike rates along expected lines , with the Nifty reclaiming the 200 day simple moving average (SMA) at 16983.

The Nifty rose 300 points at 17120, while the Sensex gained a whopping 1,040 points at 57449. The 12 index Bank Nifty was the clear outperformer, up 2.63% at 38640 as RBI raised the repo rate by an expected 50 bps through 5.9% and left the fiscal year inflation forecast unchanged at 6.7% while reducing the growth projection for FY23 to 7% from 7.2% earlier.

HDFC Bank, Tata Steel, Bajaj Finserv, IndusInd Bank and Hindalco contributed most to the Nifty gains, trading 3-5% higher.

“With RBI data indicating strong credit growth, currently at a multi-year high, we believe most banks, especially those with a higher share of the floating rate will be better placed in the rising interest rate environment,” said Naveen Kulkarni, CIO, Axis Securities. “However, the lagging deposit growth remains a cause of concern. While India is in a better place than its global peers, with domestic indicators showing continuous improvement, global factors such as ECB and Fed’s indication of steeper rate hikes in the coming policies will continue to force RBI to front load interest rates in the coming MPC meetings.”

At current price, the Nifty trades almost 8% below its record high of 18604 on October last year. It hit a 52-week low of 15183 on June 17, 2022 , before recovering to 18096 on Sep 15 . From there it corrected after the US Fed raised its Fed Funds Rate by 75 bps for the third straight time with inflation 6 percentage points above its target of 2%. This has resulted in thestrengthening of the dollar to 20-year highs against a basket of currencies including euro, Yen, and Swiss franc.

Hormuz Maloo, director, AFco Investments, expects the Nifty to test its June 52 week low in the medium term , given the weaker rupee and relatively expensive valuations of Indian stock markets to its peers .