The main stock indices extended gains and hit a fresh intraday high in mid-morning trade. Buying emerged after the Reserve Bank of India (RBI) left the key policy rates unchanged.
At 11:27 IST, the barometer index, the S&P BSE Sensex, added 329.97 points or 0.82% at 40,512.39. The Nifty 50 index was up 73.85 points or 0.62% at 11,908.85.
ICICI Bank (up 3.08%), HDFC Bank (up 2.75%), Axis Bank (up 2.60%) and Larsen & Toubro (up 2.61%) boosted the indices. Hindustan Unilever (down 1.27%) and Reliance Industries (down 0.30%) capped gains.
The broader market underperformed the benchmark indices. The S&P BSE Mid-Cap index and the S&P BSE Small-Cap were up 0.2% each.
The market breadth was almost even. On the BSE, 1164 shares rose and 1118 shares fell. A total of 122 shares were unchanged.
India reported 8,93,592 active cases of COVID-19 infection and 106,490 deaths while 59,06,069 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India. Total COVID-19 confirmed cases worldwide stood at 36,444,284 with 1,060,929 deaths.
RBI Policy Outcome:
RBI's Monetary Policy Committee (MPC) decided to hold key policy rates at existing levels. Three new external members in the panel voted in today's decision. The repo rate, the interest rate at which it lends short-term funds to commercial lenders, was retained at 4%. Consequently, the reverse repo rate, at which the RBI borrows from lenders, remained unchanged at 3.35%.
The central bank retained its "accommodative" stance on monetary policy to support the coronavirus-hit economy.
Reserve Bank of India (RBI) Governor Shaktikanta Das said that India's GDP growth will contract by 9.5% in fiscal 2021 due to disruptions caused by the Covid-19 pandemic that has hit economic activities. However, the GDP growth rate may break out of contraction and turn positive during January-March due to recovery seen across sectors, he added.
Shares of housing finance companies (HFCs) rallied after the Reserve Bank of India (RBI) decided to extend the scheme of co-lending to all non-banking financial companies.
LIC Housing Finance (up 8.25%), GIC Housing Finance (up 7.35%), Repco Home Finance (up 7.33%), Can Fin Homes (up 5.72%), Indiabulls Housing Finance (up 3.29%), PNB Housing Finance (up 3.23%) and Housing Development Finance Corporation (HDFC) (up 2.15%) advanced
In 2018, the RBI put in place a framework for co-origination of loans by banks and a category of non-banking financial companies (NBFCs) for lending to the priority sector, subject to certain conditions.
The arrangement entailed joint contribution of credit at the facility level, by both the lenders as also sharing of risks and rewards between them for ensuring appropriate alignment of respective business objectives.
Based on the feedback received from the stakeholders, to better leverage the respective comparative advantages of the banks and NBFCs in a collaborative effort, and to improve the flow of credit to the unserved and underserved sector of the economy, it has been decided to extend the scheme to all the NBFCs (including housing finance companies), to make all priority sector loans eligible for the scheme and give greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC, etc. The proposed framework will be called as "co-lending model". The revised guidelines will be issued by end of October 2020.
Asian markets were trading on a mixed note. Stocks in mainland China surged as they returned to trade on Friday from holidays. Markets in South Korea and Taiwan are closed on Friday for holidays.
A private survey showed services sector activity in China expanding in September. The Caixin/Markit services Purchasing Managers' Index for September came in at 54.8.
In US, stocks ended higher on Thursday as comments by U. S. President Donald Trump fueled hopes of fresh fiscal support, while data underscored the view that the labor market recovery was struggling to gain momentum.
Investor focused on ongoing developments regarding potential new fiscal stimulus stateside. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke on Thursday about a broad coronavirus stimulus plan, after U. S. President Donald Trump pulled out of talks earlier in the week and called for stand-alone bills.
Initial claims for state unemployment benefits totaled a seasonally adjusted 840,000 for the week ended October 3, compared with an upwardly revised 849,000 in the prior week, the Labor Department said on Thursday.
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