Can RBI trigger Indian stock market rally after interest rate pause — explained

According to stock market experts, to put bulls in the drivers seat, this relief rally needs to turn into a pull back rally and it is possible only when key benchmark indices, especially Nifty and Bank Nifty breach its recent swing highs. They said that recent swing high on Nifty 50 index is 18,120 whereas on Nifty Bank index, this crucial level stands around 41,850 mark.

Expecting buy mode to continue on Dalal Street when Indian stock market opens on Monday, Ruchit Jain, Lead Research at 5paisa.com said, “The RBI Policy outcome to pause rate hikes led to rally in the rate sensitive sectors which supported the momentum towards the end of the week. The daily momentum readings are in ‘Buy Mode’ and hence the short term trend remains positive for the Nifty. However, the readings on the lower time frame charts have reached the overbought zone and hence either a pullback or a consolidation cannot be ruled out in the coming week.” He said that FII’s too have started covering their short positions in the index futures segment which will support the momentum.

US dollar holds key

Advising stock market traders and investors too keep an eye on Dollar Index, Anuj Gupta, Vice President — Research at IIFL Securities said, “US dollar holds key as current rally in global markets can be attributed to weakness in the American currency as well. Dollar Index has tumbled towards 2-month low that has brought FIIs towards emerging markets, which includes Dalal Street as well. any further weakness in the US dollar rates may trigger further buying by the FIIs and this could help Nifty and Bank Nifty to breach its immediate hurdle and may be its recent swing highs.” He said that Dollar Index has immediate support placed at 100 levels and chances are high for the index to hit double digit in near term.

Nifty vs Bank Nifty: Which is better placed?

On important levels that one should remain vigilant in current stock market rally, Anuj Gupta of IIFL Securities said, “Nifty 50 index is facing immediate hurdle at 17,800 to 17,850 levels but for current relief rally to turn pull back rally, Nifty needs to breach its recent swing high levels that is around 18,120 mark. So, Nifty has to breach the immediate hurdle to move towards its recent swing high levels. But, for Nifty Bank index, immediate hurdle is placed at 41,200, which may get breached if the RBI-fueled rally continues for one more session.”

Stocks to buy on Monday

Anuj Gupta said that Nifty Bank index is better placed to breach its recent swing high in comparison to 50-stock index Nifty. On stocks to buy from banking segment, Anuj Gupta advised positional investors to look at SBI, HDFC Bank, ICICI Bank and Federal Bank shares as they are expected to outperform its peers in upcoming sessions. In case, FIIs remain net buyers in upcoming sessions, then Kotak Mahindra Bank shares may also give some strong upside moves.

Analysing the impact of RBI policy meeting outcome on Indian stock market, Amit Gupta, Managing Director at SAG Infotech said, “The banking and NBFC industries will benefit from the repo rate remaining unchanged, while infrastructure and real estate may also benefit. Yet, the current global financial crisis and persistent inflation remain causes for worry, making it crucial to keep track of how previous rate rises have affected the overall situation.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.