Taking Stock: Markets gain for second session; awaits RBI policy

Indian stock markets ended positively for the second consecutive session on news of the BJP-led NDA securing a third consecutive term. Global stocks rose on expectations of a US rate cut and sustained growth in artificial intelligence.

At closing, Sensex surged by 0.93 percent or 692.27 points, reaching 75,074.51, while the Nifty index closed at 22,821.40, up by 0.89 percent or 201 points. In broader indices, BSE MidCap rose by 2.3 percent, and BSE SmallCap saw a jump of 3.06 percent.

Among sectoral indices, BSE Realty led with a gain of 4.85 percent, followed by BSE Industrials and capital goods indices, both jumping over 3.7 percent and 3.4 percent, respectively. Other gainers included Oil & Gas, Power, Telecommunication, and IT sectors, each up by over 2.5 percent.

Investors are now awaiting Reserve Bank of India's bi-monthly policy due on June 7. Analysts expect the central bank to maintain status quo for the eighth consecutive time, keeping interest rates unchanged at 6.5 percent, making the policy decision a non-event for the markets.

Outlook for June 7

Vinod Nair, Head of Research, Geojit Financial Services:

The benchmark indices maintained their positive momentum, as the new coalition is about to swear in, which is predicted to be a stable government. However, anxiety persists over the new cabinet being put in place and policy measures expected to be announced in the coming budget. Meanwhile, the market is awaiting fresh signals from the RBI's comments on liquidity.

Ajit Mishra – SVP, Research, Religare Broking:

Markets edged higher, gaining nearly half a percent, continuing Wednesday’s rebound. After an initial uptick, the Nifty oscillated within a range and finally settled at 22,821.40 levels. Most sectors moved in sync with this trend, with realty, IT, and oil & gas among the top gainers. The broader indices outperformed the benchmark, gaining between 2 percent-3 percent.

It appears that markets have adjusted to the recent election results, and stability on the global front is further boosting positivity. While a breather in the index might occur after the recent rebound, the overall tone is likely to remain positive. With all key sectors participating in the move, we suggest maintaining a “buy on dips” approach, focusing on quality names during pullbacks.

Aditya Gaggar, director at Progressive Shares:

Post the knee-jerk reaction in the opening trade; the Index kept compounding its gains for most part of the session, but a reversal in the Banking stocks erased half of the gains. It was all due to the IT stocks that the Index recovered and to end the session at 22,821.40 with gains of 201.05 points. From a sectoral point of view, the Realty sector was the biggest gainer, ending the day with gains of more than 4.50 percent followed by Media and PSU Banks; on the flip side, FMCG and Pharma were the major laggards.

In the case of Broader market performance, Mid and Smallcaps gained over 2 percent and beat the Frontline Index. Indecisiveness was seen between the bulls and bears as Nifty50 formed a Spinning Top candlestick pattern. The level of 22,485 will serve as a support point while on the higher side, the immediate hurdle is placed at 23,080-23,130.

Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas:

Nifty witnessed a gap up opening and after consolidating during the day. It held on to the gains and closed in the green up ~201 points. On the daily charts, we can observe that the Nifty has witnessed a sharp recovery in the last couple of trading sessions and now reached the 22900 level which coincides with the 78.6% Fibonacci retracement level of the fall from 23340 – 21280. We expect Nifty to consolidate after the sharp runup and considering it has reached a crucial resistance level the probability of a rangebound movement is high. The range is likely to be 21800 – 23000 from a short-term perspective. India VIX  cooled off by another 12 percent today and closed around 16.59 today and we expect it to cool off further as the uncertainty reduces.

Bank Nifty has also witnessed a range bound day of trade. The RBI policy event is likely to have a bearing on the bank Nifty tomorrow. Key Support levels are placed at 48800 – 48500 while key resistance is at 49700 – 50000 zone. We expect the Bank Nifty to consolidate around 49000 for tomorrow’s trading session.

Rupak De, Senior Technical Analyst, LKP Securities:

The Nifty continued to rise after a bullish harami pattern formation yesterday on the daily timeframe. However, during the day, the index remained range-bound, oscillating between 22,650 and 22,900. The India VIX has slipped sharply below 17 in the last two days, signaling low volatility. In the near term, the index might continue remaining within the bands of 22,600-23,000.