RBI measures, global markets surge propel Sensex, Nifty to one month high

Most global markets surged as investor appetite for risk assets improved due to the progress of an experimental drug for treating covid-19 and on US's plan to reopen its economy.

The benchmark indices rallied on Friday, buoyed by the support measures announced by the Reserve Bank of India (RBI), amid a strong rally in the global market. The Sensex closed at 31,589, up 986 points, or 3.2 per cent, while the Nifty soared 274 points, or 3.05 per cent, to end at 9,267. Both indices cl­o­sed at levels last seen a month ago after posting ba­ck-to-back weekly gains.

Most global indices surged, as investor appetite for riskier assets improved following progress in an experimental drug for treating Covid-19, and the US’ plan to revive its economy.

The RBI on Friday cut the reverse repo rate by 25 basis points (bps) to 3.75 per cent. The central bank also announced the second phase of the targeted long-term repo operation (TLTRO), aimed at providing liquidity support to small and mid-sized non-banking financial companies (NBFCs). It also offered banks relief on asset quality recognition, and pledged to provide ample liquidity.

 

 

The markets were initially subdued, with the Sensex coming off nearly 500 points after the RBI’s measures. But, a strong undercurrent in global indices saw the benchmarks close near the day’s high, with banking and financial stocks leading the charge. Axis Bank surged 13.4 per cent, while ICICI Bank and IndusInd Bank rose over 9 per cent. Consumer stocks saw profit-booking, with Nestlé and Hindustan Unilever slipping 3 per cent and 2 per cent, respectively. “The measures announced by the RBI will help inject the much-needed liquidity into the system, and facilitate as well as incentivise credit flow. This will provide flexibility on regulatory forbearance,” said Motilal Oswal, MD and CEO of Motilal Oswal Financial Services.

NBFCs, including housing financiers and microfinance firms, posted huge gains. “NBFCs are clear beneficiaries. For investors in banks, the provision of higher liquidity and relaxation in provisioning norms are welcome,” said Dhiraj Relli, MD and CEO of HDFC Securities. Global investors also cheered the progress made by an experimental drug, developed by Gilead Sciences. It even helped the US outline plans to revive its economy.

Analysts said the signal towards reopening of the world’s largest economy, and possibility of effective treatment, were big sentiment boosters. 

Indian markets have now conclusively entered the bull territory. The Sensex and the Nifty have risen 21 per cent from the lows of 25,981 on March 23.