Amidst a backdrop of economic anticipation and market speculation, the Reserve Bank of India (RBI) recently unveiled an optimistic forecast for India’s Gross Domestic Product (GDP), igniting a surge in market sentiment. As the news of the GDP forecast reverberated across trading floors, both the Sensex and Nifty indices rallied, marking an impressive uptick of nearly 2% by midday on June 7.
The Monetary Policy Committee (MPC), in its latest announcement, revised India’s real GDP growth projection for the fiscal year 2024-25 (FY25) upwards to 7.2%, up from the earlier estimate of 7%. This upward revision injected a fresh wave of optimism into the markets, as investors welcomed the prospects of improved economic performance. This positive outlook is primarily driven by expectations of bolstered rural and urban demand conditions, buoyed by favorable monsoon forecasts.
However, perhaps equally significant was the MPC’s decision to maintain the policy rates unchanged at 6.5%, a move that was largely in line with market expectations. This decision underscores the central bank’s cautious approach towards monetary policy, as it seeks to balance the need for economic stimulus with the imperative of containing inflationary pressures.
The market response to the RBI’s announcements was swift and decisive. By midday, the Sensex had surged by an impressive 1,384 points, reaching a level of 76,459, while the Nifty 50 index had gained 391 points to breach the 23,000 mark and settle at 23,213. This surge in market indices underscored the robustness of investor confidence in the wake of the RBI’s optimistic outlook for the economy.
Notably, the positive momentum was not confined to the benchmark indices alone. The broader market also witnessed significant buying interest, with both the BSE Midcap and BSE Smallcap indices registering gains of 0.7% and 1.6% respectively. This broad-based rally across market segments further underscored the depth and breadth of investor optimism in response to the RBI’s announcements.
Sector-wise, the buoyancy in the market was palpable across all 13 sectoral indices, with IT, financial services, and oil & gas stocks emerging as the frontrunners in terms of gains. Notable performers included Infosys, Wipro, and TCS, which led the Nifty IT index to surge by over 3%. Similarly, sectors such as metal, pharma, and realty also witnessed gains ranging from 1% to 2%, highlighting the broad-based nature of the market rally.
In the aftermath of the RBI’s announcements, market experts weighed in on the implications for various sectors and industries. Ramani Sastri, Chairman and MD of Sterling Developers, welcomed the RBI’s decision, noting its positive impact on the real estate sector. Similarly, Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra, emphasized the stability it brings to the housing market and consumer confidence.
From a technical standpoint, Sameet Chavan, Head of Research at Angel One, provided insights into the potential support levels for the Nifty index and cautioned investors to remain vigilant amidst the prevailing market dynamics. With Nifty surpassing the crucial resistance level of 23,000, Chavan’s guidance underscored the importance of prudence and risk management in navigating the markets.
In terms of individual stock movements, notable gainers included Wipro, Bajaj Finance, Infosys, LTIMindtree, and Tech Mahindra, while SBI Life, Bajaj Auto, and TCP experienced declines. Tata Chemicals witnessed a notable fall of over 4% following a fine imposed on its subsidiary, while Garden Reach Shipbuilders & Engineers (GRSE) saw a 6% surge after securing a DRDO contract.
As the trading day progressed, market participants remained focused on upcoming events such as the release of the US’s weekly jobless claims report and the ministry allocations in India over the weekend. These developments are expected to provide further clarity to investors and could potentially influence market sentiment in the days ahead.
In conclusion, the RBI’s optimistic GDP forecast has injected a fresh wave of confidence into the markets, propelling indices to new heights and reaffirming investor faith in India’s economic resilience. However, amidst the prevailing optimism, market participants remain vigilant, cognizant of the need for prudence and risk management in navigating the ever-evolving market landscape.