After The Bell: RBI#39;s dovish stance helps bulls, what should investors do on Thursday?

Market Outlook

Indian markets rose for the second day in a row on April 7 helped by positive global cues and a dovish stance by the Reserve Bank of India (RBI) assuring sufficient liquidity to the financial markets.

Traders preferred to book some profits but benchmark indices still managed to close the day with gains. The Sensex rallied 460 points to close at 49,661, while the Nifty50 ended 135 points higher to 14,819.

Sectorally, buying was seen in auto, banks, telecom, metals and consumer discretionary stocks, while the power index saw mild profit-taking.

On the broader markets front, the S&P BSE midcap index rose 0.8 percent, while the S&P BSE smallcap index closed with gains of 1.3 percent.

Also Read: RBI Monetary Policy: Key takeaways from Governor Shaktikanta Das’ address

Rate-sensitive stocks rallied after the RBI maintained the status quo on policy rates and reassured financial markets of its commitment to fuel the growth engine. The central bank said it will retain its accommodative policy stance as long as necessary.

“The RBI has delivered a dovish pause and reaffirms its accommodative stance and impetus to support the economic recovery. The central bank announced a secondary market G-Sec acquisition programme (GSAP 1.0), which indicates an intention to calendarise its G-sec purchases and will help to manage the yield curve and may help to reduce the term premium as well,” Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life told Moneycntrol.

“Overall, the policy has been dovish as supported by fall in bond yields and this should also benefit the equity markets by keeping borrowing costs in check for some time,” he said.

Technically, the index closed above the 50-DMA which should help bulls build some more gains. On the upside, 15,000 is likely to act as still resistance, while support is placed at 14,800-14,650.

Here is what experts suggest investors should do on April 8:

Ashis Biswas, Head of Technical Research, CapitalVia Global Research Limited

The Nifty witnessed a breakout above 14,800. As of now, the short-term technical condition of the market show an upward shift of the prevailing market range and is likely to range between 14,600 and 15,100.

The market breadth improved further along with other momentum indicators like RSI, MACD, indicating the presence of an uptrend. The market is expected to gain momentum, which could lead to an upside projection till 15,100.

Chandan Taparia, Vice President | Retail-Research at Motilal Oswal Financial Services Limited

The Nifty50 formed a Bullish candle along with a long shadow on the daily scale and continued its formation of higher lows.

It has been finding sustained selling pressure near 14,880 for the last 12 trading sessions. Now, the index has to cross and hold above 14,880 to witness a range breakout and an up move towards 15,000, while on the downside, support exists at 14,650 and 14,550.

Gaurav Dua, SVP, Head-Capital Market Strategy, Sharekhan by BNP Paribas

In line with expectations, the RBI maintained status quo on policy rates and reassured the financial markets of its commitment to retain an accommodative policy stance till the prospects of sustained economic recovery was secured. Even on the liquidity front, the signals were dovish.

It extended the TLTRO on-tap liquidity scheme along with the priority sector tag for NBFCs till September 30. The bond market reacted positively, with the 10-year bond yield easing by 6-8 bps during the day.

The easing of the yield curve and commitment to keeping interest rates low with ample liquidity are positives for the equity markets too. The consistency and continuity in the monetary policy stance is welcome and will cheer up market sentiments.

Rohit Singre, Senior Technical Analyst at LKP Securities.

The index closed above 14,800 with gains of nearly one percent and formed a bullish candle on the daily chart. Again, 14900 acted as the strong hurdle.

As long as we don’t see a decisive breakout above 14,900, the upside will be capped and once we see a breakout above 14,900, then we may see a good short-covering move, which can push the index towards the 15,000-15,100 zone quickly, immediate support is still placed at 14,700-14,600 zone.

Shrikant Chouhan, Executive Vice President (Equity Technical Research), Kotak Securities

The narrow range activity continues but the index recovered sharply from 14,650/49,100 support levels.

We are of the view that after a long time banking stock witnessed buying interest and the texture suggests for the next few trading sessions, 32,500 will be the strong support zone for the Bank Nifty. Trading above the same we can expect a strong pullback rally till 34,000-34,300.

Technically, the Nifty/ Sensex is still trading within a narrow range. On the higher side, 14,900/ 50,250 would be the immediate hurdle for the Nifty, above the same we can expect one more uptrend up to 15,000-15,100/ 50,800-51,200.

On the flip side, 14,750/49,400 could be the immediate support for the bulls, below it a sharp intraday correction of up to 14,600/48,800 is not ruled out.

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