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Opinion

Sensex and Nifty hit record highs after RBI revised GDP forecast

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Domestic stocks hit record highs on Friday after the Reserve Bank of India (RBI) held interest rates steady amid persistent high inflation, while maintaining its accommodative monetary policy stance. The NSE Nifty 50 Index was up 0.80% to 13,239.05 at 10:42 am and the S&P BSE Sensex was up 0.80% to 44,993.92, hitting all-time highs. The rupee strengthened to 73.72 against the dollar.

Rate-sensitive financial stocks also rose after the policy announcement. The Nifty Banking Index, which rose nearly 24% in November, was up 1.27%. UltraTech Cement Ltd rose as much as 6.2% to a record high, a day after the cement maker said it would invest Rs 54,770 crore to expand capacity.

RBI Governor Shaktikanta Das said that India’s outlook has improved with the progress of Covid-19 vaccines, consumer confidence has turned positive, and the projected real GDP for the current financial year will contract by just 7 ,5%.

All 53 analysts and economists in a Reuters poll in November said they did not expect any rate changes at the three-day policy meeting that ends on Friday. “RBI has been extremely proactive in terms of supporting the economy and the market in any way possible,” said Avneesh Sukhija, senior financial analyst at BNP Paribas India.

The decision made by RBI on Friday is a continuation of the October decision to enter a survival recovery mode, Sukhija added. Including Friday’s session, benchmarks have reached all-time highs in 11 of the last 18 sessions, driven by progress in developing a working coronavirus vaccine. They added more than 11% in November to record inflows from foreign institutional investors.

The RBI has already cut its key interest rate by a total of 115 basis points this year to reignite growth and cushion the impact of the coronavirus pandemic.

(With contributions from the agency)

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