Also Read: RBI monetary policy: Inflation to growth outlook – 5 key highlights from RBI MPC outcome
Despite a steep loss of 6 per cent on June 4, market benchmarks are up with decent gains in June so far. Sensex is up about 3.7 per cent, while the Nifty 50 has gained nearly 3.4 per cent in the first week of June.
The Sensex hit its fresh all-time high of 76,795.31 during the session before ending at 1,619 points, or 2.16 per cent, higher at 76,693.36, with all components in the green.
Nifty 50 closed 469 points, or 2.05 per cent, higher at 23,290.15, with only two stocks – SBI Life (down 1.03 per cent) and Tata Consumer (down 0.43 per cent) – in the red.
BSE Midcap index rose 1.28 per cent, while the Smallcap index ended with a gain of 2.18 per cent.
The overall market capitalisation of the firms listed on the BSE rose to nearly ₹423.4 lakh crore from nearly ₹415.9 lakh crore in the previous session, making investors richer by about ₹7.5 lakh crore in a single session.
Let’s take a look at five key factors that appear to have boosted the stock market:
1. RBI raises growth forecast
The RBI raised its GDP growth forecast for FY25 to 7.2 per cent from 7 per cent earlier. The central bank expects an above-normal monsoon and buoyancy in services activity to facilitate rural and urban consumption and boost the domestic economy. This seems to have influenced market sentiment.
RBI projected real GDP growth for FY25 at 7.2 per cent with Q1 at 7.3 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent.
Also Read: Also Read: RBI Monetary Policy: Raises FY25 real GDP growth forecast to 7.2% from 7%
“Domestic markets shrugged off the weak global cues, as investors cheered the RBI’s higher growth forecast for FY25 in its credit policy announcement, which propelled Sensex to a fresh all-time high above the 76k-mark on massive broad-based buying support,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.
2. Inflation fears easing
The RBI said it expects inflation to moderate going ahead amid expectations of above-normal monsoon and stable crude oil prices.
“Food inflation pressures could be somewhat relieved by the expectations of an above-normal monsoon, which bodes well for the kharif season,” RBI Governor Shaktikanta Das said.
Assuming a normal monsoon, Governor Das projected CPI inflation for FY25 at 4.5 per cent, with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent.
Also Read: RBI monetary policy: MPC keeps FY25 inflation forecast unchanged at 4.5%
“The arrival of monsoon rains on time and expectations of its even spread across the country also raised hopes of softening inflation going ahead. With the election uncertainty now over and the NDA party most likely to form the government, investors are hopeful that the action will now shift to reforms and the upcoming Union Budget,” said Tapse of Mehta Equities.
3. Rate cut hopes reignite
Some experts believe the RBI’s rate cuts may be nearer than expected. They observe subtle signals of the beginning of the rate cuts cycle in the six-member MPC’s voting pattern.
“RBI’s status quo on rates and stance was in line with market expectations, but the split in voting patterns clearly shows the increasing probability towards a pivot in the policies ahead,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
Also Read: RBI Monetary policy: A change in stance possible in August? Will RBI cut rates ahead of US Fed
Meanwhile, therate cut cycle is expected to start in the coming months in major economies. The European Central Bank (ECB) cut the key deposit rate by a quarter-point to 3.75 per cent on Thursday.
4. Hopes of political stability and policy continuity prevail
BJP-led NDA is all set to form a new government. Narendra Modi will take oath as the Prime Minister of India for the third time on Sunday, June 9. All parties in the NDA collation have said that they remain firmly united and the government will complete its tenure smoothly.
Also Read: Narendra Modi to take oath as PM for 3rd time on June 9 at 6 PM: Pralhad Joshi
Moreover, it is unlikely that the government will compromise on its pro-development agenda and experts expect policy continuity at the Centre.
As Mint reported, Narendra Modi on Friday said that its 10 years of rule was “just a trailer”, and the alliance is now set to work harder and faster for the development of the country.
Also Read: ’10 years was just trailer,’ Narendra Modi hails NDA at parliamentary meet | Top quotes
“The anticipation of stability within the coalition government at the centre, coupled with the RBI’s upward revision of its growth forecast for FY25 to 7.2 per cent, fuelled a broad-based rally in the domestic market. The Indian market surpassed its previous record high set on exit poll day and reached a fresh peak,” said Vinod Nair, Head of Research, Geojit Financial Services.
5. Technical factors
According to Amol Athawale, VP-Technical Research, Kotak Securities, the short-term formation of the market is positive. However, due to temporary overbought conditions, we could see rangebound activity at higher levels.
“On the lower side, 23,000-22,800/75,500-74,900 would be the key support zone while 23,500-23,700/75,200-75,800 could act as key resistance areas for the bulls. For short-term traders, buying on dips and selling on rallies would be the ideal strategy,” said Athawale.
According to Rupak De, Senior Technical Analyst, LKP Securities, the short-term trend of the market looks very positive as the index closed near an all-time high.
“Going forward, the market remains a buy on dips as long as 23,000 is not broken. On the higher end, the index might move towards 23,500-23,600. On the lower end, profit booking might occur only below 23,000,” said De.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
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Published: 07 Jun 2024, 03:34 PM IST
