Analysts stated on Saturday that despite worries about trade battles and geopolitical escalation, the domestic market showed resilience after beginning the week with consolidation.
Despite consolidating for the third week in a row, markets ended the week up about 1% thanks to encouraging domestic indicators.
After spending the most of the week range-bound, benchmark indices saw a significant Friday rise and closed close to the week’s high, with the Sensex closing at 82,118.99 and the Nifty finishing at 25,003.
The RBI’s policy statement, which caught the market off guard, was the week’s high point. The central bank demonstrated a strong pro-growth stance by implementing a 100 bps CRR reduction and a 50 bps repo rate drop, which were both more drastic than anticipated. Ajit Mishra, SVP, Research, Religare Broking Ltd., said that the policy attitude was also changed from “accommodative” to “neutral,” which was a move that was unexpected.
The RBI has demonstrated its commitment to boosting domestic economy in the face of global uncertainty by accelerating its easing measures. This decisive measure strengthens trust in the central bank’s willingness to help economic recovery while managing inflation concerns, even though such a strong approach was anticipated to develop gradually.
Sectoral performance this week was generally favorable, with high purchasing demand observed in rate-sensitive sectors. The surge was led by banking, real estate, and auto sectors, which reflected better consumer mood and credit growth forecasts. Because better borrowing conditions are anticipated with lower interest rates, financials and NBFCs also benefited.
On the other hand, ongoing global uncertainty, especially in the U.S. and European markets, caused IT equities to underperform. With gains ranging from 2.8% to 4%, the midcap and smallcap indices in the larger markets both beat the benchmarks, indicating that investors were taking on more risk.
According to Vinod Nair, Head of Research at Geojit Investments Ltd., investors concentrated on domestically oriented and interest-sensitive sectors like financials, real estate, retail, and FMCG, which saw strength, supported by strong institutional inflows. These sectors were bolstered by supportive macro indicators like a favorable monsoon, strong Q4 GDP, and GST collection.
Due to the continued uncertainty in the world, profit booking was evident over the week. Due to superior profitability and valuations, mid- and small-cap companies typically performed better than large-cap companies.
“The aggressive RBI rate cut, supported by cooling inflation and a steady GDP outlook, is likely to support investor confidence amidst the ongoing global uncertainties,” Nair said, adding that China’s limits on rare earths pose long-term dangers and that investors are waiting for the US inflation report.
In the future, market players will look for further clues in important macroeconomic data. Experts stated that in order to assess demand patterns and the central bank’s next course of action, high-frequency indicators like CPI inflation will be actively monitored.
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