Amid hopes the U.S. and China will work on a compromise to prevent a trade war and on expectations that the Indian economy will be on track in the coming quarters, the bulls got back to ring today. Some hectic short-covering at a few front line counters too helped drive the key indices up sharply in today's session.
After the central bank allowed banks to spread their debt trading losses of the third and fourth quarters of fiscal 2017-18, over the next four quarters, bank stocks rose yesterday as banks will be able to show higher profitability due to lower provisioning. The trend continued when the market opened today and bank stocks kept moving higher and higher as the session progressed.
A number of stocks from other severely battered sectors too opened on a firm note and are still adding gains. A firm trend in Asian markets is aiding sentiment. Now, with the central bank lowering its inflation forecast and revising upward its GDP estimate for the current financial year, the mood is fairly upbeat in the market.
Also, investors reacted positively to RBI's decision to temporarily relax provisioning norms for lenders to defaulters undergoing bankruptcy resolution. The move is likely to help banks bolster their financial results for the year and quarter ended March.
The Sensex ended up 577.73 points or 1.75% at 33,596.80, after touching a high of 33,637.46 intraday. The Nifty50 of the National Stock Exchange ended at 10,325.15, gaining 196.75 points or 1.94%.
Bank and metal stocks hogged the limelight right through the session. Mirroring their surge, the BSE Bankex and the Metal indices climbed 2.78% and 4.14%, respectively. Realty, capital goods, information technology, consumer durables and automobile stocks also had a good outing.
Besides a number of large caps, scores of midcap and smallcap stocks too ended with handome gains and the market breadth was pretty strong with gainers outscoring losers 10 to 3.
Unveiling its first bi-monthly policy review for 2018-19, the Reserve Bank of India's Monetary Policy Committee has kept the repo rate unchanged at 6%, as widely expected.
It is understood that five of the six members of the committee voted in favour of holding the rate. The Reverse Repo rate now remains unchanged at 5.75%. The central bank has left the CRR and SLR also unchanged at 4% and 19.5%, respectively.
Regarding inflation, the committee is retaining its policy stance 'neutral' and has suggested upside risks in the near future.
In February, the consumer price inflation slowed to 4.4%, below the central bank's March projection of 5.1%. In the February meeting, the bank's Monetary Policy Committee had voted for a pause in the monetary policy with the exception of RBI executive director Michael Patra who voted for a 25 basis points hike.
For the first half of 2019, the apex bank expects inflation to be between 4.7% and 5.1%, lower than earlier forecast of 5.1-5.6%. For the second half of 2019, it has been cut to 4.4% from 4.5-4.6%.
The pace of growth in FY19 could be higher as investment activity picks up and global demand comes back, says RBI Governor Urjit Patel.
On the whole, GDP growth is projected to strengthen from 6.6% in 2017-18 to 7.4% in 2018-19, in the range of 7.3-7.4% in the first half and 7.3-7.6% in the second half, with risks evenly balanced, the central bank said.