Sensex closes above 45,000 level for first time on RBI’S measures
Sensex, India’s benchmark stock index, clawed back some losses to close above 45,000 points for the first time ever on Friday, as the country’s central bank upgraded its GDP target for the current fiscal year and kept interest rates steady in the face of stubbornly high inflation.
The S&P BSE Sensex closed 446.90 points or 1% higher at 45,079.55, while the NSE Nity 50 index was up 124.65 points or 0.95% at 13,258.55. The rupee strengthened to 73.94 against the dollar.
Including the current session, the benchmark indexes have hit record highs for 11 of the last 18 sessions. They added more than 11% in November on record inflows from foreign institutional investors (FIIS).
Rate-sensitive financial stocks also rose ater the policy announcement. The Nity Banking index, which surged nearly 24% in November, was up 0.88%.
Ultratech Cement jumped as much as 6.2% to a record high, a day ater the cement manufacturer said it would invest Rs54.77 billion to expand capacity.
Reserve bank of india( r bi) governors ha ktik ant a Das said India’s prospects have brightened with progress on COVID-19 vaccines, and projected real GDP for the current financial year to shrink just 7.5% from an earlier expectation of a 9.5% contraction. The RBI kept the key lending rate unchanged at 4%. All 53 analysts and economists in a Reuters poll conducted in November had said they did not expect any change in rates.
The central bank has already cut its key interest rate by a total 115 basis points this year to revive growth and cushion the impact of the pandemic.
Governor Das also announced measures to improve access to funding for stressed sectors and said the RBI would take further steps when necessary to ensure ample rupee liquidity to sustain visible growth impulses.
The RBI’S stance marks a continuation from October’s decision of entering a revival mode from survival, said Avneesh Sukhija, a senior financial analyst at BNP Paribas India.
At a time when the proposal of giving bank licences to corporate houses has received criticism from several quarters, Shaktikanta Das on Friday said that the central bank has not decided on the issue yet and will take a “considered” decision ater going through all the comments on it and examining the whole mater.
In a virtual press conference ater the monetary policy meet, Das said that is only a proposal of an internal working group of the RBI and is not the view of the central bank.
“Let me say it very clearly that it is a report by an internal working group of RBI. It should not be seen as RBI’S point of view and decision. I think that has to be very clearly understood,” he said.
The Governor said that the panel acted independently and had their independent deliberations.
“They have given a certain point of view. RBI has not taken any decisions on these issues so far”
Noting that the RBI’S approach is “consultative”, Das said: “The report of the internal working group is now in the public domain. We will receive comments. We will examine the whole mater and take a considered decision.”
Earlier this month an Internal Working Group (IWG) of the RBI recommended allowing large Indian corporate houses to enter the banking sector, following which questions were raise on the timing of the suggestion and several economists and experts said that the proposal may be detrimental to the Indian banking sector.
Former RBI Governor Raghuram Rajan described the proposal as a “bad idea and termed the recommendation as a “bombshell”.
Meanwhile, India’s services sector recovery weakened in November despite further upturn in new work supported business activity growth.
However, the sector reported the first rise in employment for nine months.
Moreover, the overall level of positive sentiment climbed to the highest since February amid predictions that market conditions would normalise once a vaccine for the coronavirus disease 2019 (Covid-19) is rolled out.
Accordingly, the seasonally adjusted India Services Business Activity Index reading remained above the critical 50 mark that separates growth from contraction for the second month in a row during November.
Despite falling from 54.1 (index reading) in October to 53.7 ( index reading) in November, the latest reading was still indicative of a solid pace of expansion.
Companies that signalled output growth commented on beter demand conditions and a relaxation of COVID-19 restrictions.
“New business inflows likewise rose for the second straight month and solidly, despite growth easing from October. According to survey participants, the increase in sales stemmed from a pick-up in demand, marketing efforts and the loosening of Covid-19 controls,” the IHS Markit report said.
The benchmark indexes have hit record highs for 11 of the last 18 sessions and they added more than 11% in November on FIIS support