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Informist, Friday, Dec. 6, 2024

By Alina Geogy

MUMBAI - Benchmark indices ended a choppy session slightly lower Friday, snapping a five-day winning streak. The indices moved in a thin range for most part of the session after the Reserve Bank of India left the policy repo rate unchanged and maintained the stance as neutral. The central bank cut the Cash Reserve Ratio for banks by 50 basis points, which led to a rise in most banking sector stocks as the move is expected to boost the liquidity in the system. The cut in CRR would release primary liquidity of about INR 1.16 trillion to the banking system.

Barring the gains in some bank stocks, the market's reaction was quite lacklustre as the announcements were largely priced in, analysts said. The Nifty 50 and Sensex closed at 24677.80 points and 81709.12 points, respectively, down 0.1% each. The Nifty 50 fell as much as 0.4% or nearly 90 points to its intraday low as the monetary policy statement started.

However, there was a sharp recovery in the index because of the rise in banking stocks as soon as the cut in Cash Reserve Ratio was announced. The rise was short-lived, and the index was choppy for the rest of the day. 

The RBI's decision to cut CRR and keep the key rates unchanged was in line with market expectations, Narendra Solanki, head of fundamental research – investment services at Anand Rathi Share & Stock Brokers, said. The path is now clear for interest rate cuts next year, he said. The reduction in CRR is expected to help banks, which have been struggling to raise deposits similar to the pace of credit growth, Solanki said.

Investors welcomed the reduction in CRR and shares of several public sector banks recovered from initial losses to end higher. Some private sector bank stocks also gained. Shares of Axis Bank were among the top gainers in the benchmark indices, while those of HDFC Bank and ICICI Bank took a breather after a five-day winning streak and ended slightly lower. The Nifty PSU Bank closed 0.4% higher, while the Nifty Bank was down 0.2%.

The RBI's announcements failed to cheer investors enough, especially after the sharp fall in the market over the last two months owing to record selling by foreign institutional investors and expensive valuations, among other reasons. The sharp moderation in GDP growth in the September quarter and elevated inflation are also a worry for investors, analysts said. The RBI reduced the GDP forecast for the financial year ending March and raised its projection for inflation.

"Going forward, high frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in Q2FY25 (Jul-Sept) and has since recovered, aided by strong festive demand and pick up in rural activities," IDBI Capital Markets & Securities said in a report. Inflation increased sharply in Sep-Oct led by an unanticipated increase in food prices and now, a good rabi season would be critical to the softening of the food inflation pressures, the brokerage said.

The automobile and metals stocks were among the major gainers. The Nifty Metal index ended over 1% higher with most constituents in the green, while the Nifty Auto extended early gains steadily and closed nearly 1% higher. In the Nifty Metal index, gains were led by shares of Vedanta, up 6.1%, and Hindustan Zinc, up nearly 2%.

Among automobile stocks, shares of Tata Motors and Bajaj Auto, up 3.1% and 2.3%, respectively, were the best performers in the Nifty 50 index. Shares of Maruti Suzuki India recovered from early losses and ended over 1% higher after the company announced it would raise prices of cars by up to 4% from January. The automaker said prices were being raised because of rising input costs and operational expenses. The increase will vary depending on the model, the company said. The price hike may help the company pass on the impact of increased costs to the market and protect margins, Arun Agarwal, vice-president, equity research, at Kotak Securities, said.

Among other stocks, Ola Electric Mobility fell nearly 3% after the Central Consumer Protection Authority sought additional documents and information from the company with regards to the show cause notice issued in October related to 10,644 complaints. Shares of ITI closed over 13% higher after the stock's volume traded surged, making it the top gainer in the Nifty 500 index. Shares of diagnostic chain Suraksha Diagnostic ended 5.4% lower at INR 417.25 after listing at a discount of 0.7% on the bourses Friday.

* Of the Nifty 50 stocks, 21 rose and 29 fell

* Of the Sensex stocks, 14 rose and 16 fell

* On the NSE, 1,694 stocks rose, 1,127 fell, and 77 were unchanged

* On the BSE, 2,399 stocks rose, 1,590 fell, and 99 were unchanged

* Nifty Metal: up 1.2%; Nifty IT: down 0.2%; Nifty Media: down 0.3%

BSE                                               NSE

Sensex: 81709.12, down 56.74 points or 0.11%      Nifty 50: 24677.80, down 30.60 points or 0.1%

End

Edited by Vandana Hingorani

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