Stock Market: Rear guard action comes in play; consolidation after policy pause seen

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By S Jha

New Delhi, April 7: The runaway bulls were pulled back to their mats after Reserve Bank of India (RBI) Governor Shaktikant Das cautioned against euphoria over the policy rate pause. Nifty and Bank Nifty closed the day after modest gains, while Dow Jones was marginally positive at the end of the session.

Nifty, according to technical chartists, had a major leap of faith at 17435 level, and holding 17450-17460 positions the index is seen to be stable with positive bias. Also, the global equity markets are seen to be in the consolidation phase with positive bias amid ebbing of the financial fear. This sets up Nifty and bank Nifty for the next week.

Even while Das ruled out that the Rep Rate pause should not be seen to be a new normal, there are indications that inflation may sharply go down, as the harvest seasons knocks around and the food inflation may take serious beating with the arrival of the new crops in the market.

The foreign institutional investors have tuned positive in the cash market even while their domestic peers are seen to be offloading. This is also part of the pattern as the domestic institutional investors largely buy into falling market and sell on the rise.

While the indices closed the day with modest gains, actions appear to be shifting to the smallcaps, as some of the stocks which had been severely beaten in the last 18 months made strong rebound. The Indian Energy Exchange is one such scrip, which was a star of 2021, which gained strongly in the Thursday session, gaining over 10 per cent.

The Indian summer is set to sizzle, and the predictions are that the power exchanges will be tested of their strength, as the peak power demand could scale new heights in the coming weeks. IEX is a private power exchange player.

The realty scrips, including Godrej Properties, made strong gains on the back of the RBY striking rate pause button. The realty scrips have been badly beaten along with the metal pack in the last 12 months during which the RBY raised the Repo Rate by 250 basis points.

With inflation going down, as anticipated, the realty pack could breathe a sigh of relief. Reports suggest that Bengaluru property market has shown to be resilient to the downturn in the IT sector, which is witnessing a spate of layoffs.