Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities closed lower ahead of RBI's MPC policy announcement. The Nifty declined 0.2%, while broader markets out-performed the main indices as Nifty Mid Cap and Nifty Small Cap rose by 0.5% and 0.6% respectively. Sectoral indices ended mixed. Nifty Healthcare and Nifty Pharma were the major gainers which were up 1.4% and 1.3% respectively. Nifty IT and Nifty Fin Service were the primary laggards which plunged 0.9% and 0.5% respectively. The market is factoring 50 bps rate hike by the RBI.
U.S. equities closed higher and provided some relief to the market, which fell continuously since last week after FED increased the rate by 75 bps. S&P 500 climbed 2%, Dow Jones rose nearly 1.9% while Nasdaq jumped 2.05. The Bank of England engaged in bond purchases in a bid to stabilize markets. The yield on the benchmark 10-year Treasury note fell to 3.707% from 3.963% on Tuesday, registering its steepest one day drop since 2009.
The US and Europe are all headed towards a recession, while India in all likelihood to prevent it very well. The inflation has remained above the upper tolerance band of RBI for the eighth straight month and expected to remain sticky at ~7.5% in FY23, driven by increases in food prices. The rise in repo rate coupled with the inflation is likely to impact the market in the near term. Going forward, the key events for the markets includes - inflation forecast, Comments on external balance sheet, the tone of the policy statement and path on rate normalization.