Equity benchmark indices - Sensex and Nifty - closed the intraday trade on Thursday on a bullish note after the RBI's key moves to lift the economy and positive sentiment in global equities. The 30-share BSE benchmark Sensex ended 362 points higher at 38,025 and broader NSE Nifty advanced 98 points to 11,200. Of the 30 shares, 23 advanced, while 7 declined.
"The market might continue its positive movement in the near term, with more stock specific action as the earnings season progresses. Investors would now be awaiting an announcement of US stimulus which could bring cheer to the market. However we find the risk-reward unattractive at the current levels and we would advise investors to remain defensive in their portfolio approach. Traders on the other hand are advised to stay cautious and keep booking profit at regular intervals," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
Here are 5 key things to know before Friday's opening bell:
RBI monetary policy
Domestic bourses reacted positively after the RBI's encouraging measures to boost the slowing economy amid the coronavirus crisis. These decisions are also expected to have an impact on the market movement, analysts said. "The RBI's MPC today kept the repo/reverse repo rates unchanged at 4%/ 3.35% and maintained its policy stance at accommodative levels which could continue for as long as necessary to revive growth. Further, the central bank also announced measures including one-time restructuring of the loans to support NBFCs, HFCs, corporate debt market, and announced a relaxation on the loan-to-value (LTV) ratio for gold loans. Thus all these measures along with accommodative stance boosted market sentiments. The global cues on the other hand were weak as investors waited for signs of agreement on a US stimulus package," Khemka said.
No moratorium extension
The decision by RBI not to extend the moratorium period is expected to further lift the banks tomorrow. "The additional measures announced to support the stressed sectors were also received well by the market. At the same time, no extension of the moratorium and steps to further strengthen the financial system relieved the banks and other financial institutions which in turn triggered a sharp uptick across the board," said Gurpreet Sidana, Chief Operating Officer, Religare Broking.
With RBI allowing banks to lend up to 90 per cent against gold, the demand of the yellow metal is expected to rise and investors would take it into account. "This is a progressive step and should increase the demand for gold loans. This will put more money in the hands of the borrower. The increase in LTV Ratio will help us to grow the book. While this move will help broaden the gold loan market, we will also witness an increased competition in this segment. Lenders will need to ensure that their valuation and risk management processes remain tight and robust," said CVR Rajendaran, CEO & MD, CSB Bank.
On Wednesday,India saw the single-day surge of 56,282, thereby taking the total number of cases to 1,977,972. Death toll has surged past the 40,000 mark.
"The short term trend of Nifty continues to be positive with volatile movement. Some more upside is left in the market and Nifty is expected to reach the upper resistance area of 11,350 by next week. Immediate support is placed at 11,100. The stoploss for positional long trades needs to be placed at 10,900 levels," said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.
"The buoyancy in the global markets is helping the index on every dip and this scenario may continue. However, we still feel that it would be difficult for the index to sustain at the higher levels, without the participation from the banking pack thus traders should keep a close eye on the banking index for cues. The major hurdle is intact at 11,350 in the Nifty. Traders should limit their leveraged trades and prefer index majors over the others for short term trading," said Ajit Mishra, VP - Research, Religare Broking.Also read: Real GDP growth to remain negative in H1, full fiscal: RBI Gov Shaktikanta Das