Stocks up almost 1% on robust credit, tax data

Analysts said the markets are not expecting any surprises from Thursday’s Monetary Policy Committee (MPC) meeting. Declining fiscal and current account deficits, as well as deposit and loan growth, are seen as positive indications for growth.

“The domestic market is displaying resilience, unaffected by the weaker global peers, thanks to strong banks and NBFCs’ quarterly numbers and the windfall tax cut,” said Vinod Nair, head of research at Geojit Financial Services. According to Nair, investors expect RBI to make a 25-basis point (bps) rate hike before taking a pause, a move seen as positive for the markets.

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Data on deposit growth and loan disbursements indicate robust credit demand, reinforcing the view that economic growth will cross 6% in FY24, analysts said.

Manufacturing activity rising to a three-month high of 56.4 is also encouraging and indicates strong demand, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd. Additionally, net direct tax collections have exceeded Union budget estimates by 17%, confirming robust growth, he added. Khemka expects more market upmove as, after a long period, midcaps have shown momentum, and hence action can be seen in the broader markets.

Foreign portfolio investors (FPIs) provisionally bought ₹806.82 crore worth of stocks on Wednesday. Some short-covering by FPIs ahead of the monetary policy committee (MPC) decision is also likely to have helped, analysts said, with profit-booking seen in the auto and banking sectors.

Domestic institutional investors (DIIs) provisionally sold ₹947.21 crore on Wednesday. FMCG, IT and financial services stocks saw a flurry of buying, and all sectoral indices except auto and energy ended in the green.

Shares of Adani Group companies showed a mixed trend. Among Nifty stocks, Adani Enterprises saw a decline of 0.93%, while Adani Ports and Special Economic Zone rose 1.3%. Among the remaining eight Adani group stocks, two ended with gains, while six ended in the red.

The HDFC twins led Wednesday’s gains among Nifty stocks, followed by ITC Ltd, which ended with gains of more than 2%. Hindustan Unilever Ltd, Grasim Industries Ltd and Sun Pharmaceuticals Ltd too were major gainers, ending the day more than 1.8% higher.

Deepak Jasani, head of retail research at HDFC Securities Ltd, said, “Nifty rose well on Wednesday, and from its intraday high, it was just short of three points in filling the down gap made on 10 March. Once it rises above 17,574, it could open up further (and) rise towards 17800. On falls, the 17,428-17,451 band could provide support”.

Recent US data revealed a softening in the labour market and declining factory orders, increasing the likelihood of a pause in rate hikes by the Federal Reserve, analysts said. This is also leading to softness in the dollar index and a decline in US bond yields.

The rupee on Wednesday closed 33 paise stronger at ₹82 to a dollar. Anindya Banerjee, vice-president of currency derivatives and interest rate derivatives at Kotak Securities Ltd, attributed this to selling by exporters and triggering of speculators’ stop losses.

With the dollar index trading at the lowest levels since early February, the rupee remains in demand, said Banerjee. In the near term, RBI policy and the US jobs report will be key to currency movement, and Banerjee expects a range of 81.70 and 82.30 on spot rupee trading.

Brent crude, which was trading below the $70 a barrel mark last week, however, continued to trade close to $85 on Wednesday after Opec+ countries announced additional production cuts of 1.66 million barrels per day.