RBI's GDP Forecast Downgrade Drags Sensex By 132 Pts

The equity markets witnessed a downturn in the afternoon session post the RBI's announcement on the monetary policy which stated that the central bank has kept the rates unchanged but has projected a downgrade in the GDP growth at 9.5 per cent. Selling was seen in Banking names and other index heavyweights which dragged the Sensex, Nifty lower on Friday, June 4.

Experts feel that the selloff post the policy outcome is a healthy correction that occurs after a spike in the secondary markets. The overall market looks positive and the rates being unchanged will keep the flow of liquidity going as the country faces the impact of Covid-19.

"The central bank's policy stance has remained accommodative in an effort to keep liquidity in the economy as the country recovers from the covid-19 outbreak and its economic consequences," said Likhita Chepa - Senior Research Analyst at CapitalVia Global Research.

The 30-share BSE Sensex logged gains in 13 scrips and declines in 17 scrips at the market closing on Friday. The index ended the week at 52,100.05, down by 132.38 points. Shares of Nestle, Reliance, SBI, and HDFC Bank were the top losers of the index losing over a per cent each during the day's trade.

Similarly, the Nifty-50 index closed lower by 20.10 points at 15,670.25.

On the flipside, Bajaj Twins, ONGC, and L&T surged between 1-2 per cent each during the day's trade on Friday.

Among the sectors, the FMCG, Banks, and Financial sectors witnessed selling pressure in the intraday session, while Metals outperformed led by shares of NMDC (+4.15 per cent), Hind Zinc (+2.77 per cent), and Coal India (+2.72 per cent).

In the overall market breadth, 1832 shares advanced, 1279 shares declined, and 138 shares were unchanged.

How will the markets perform further?

Given the measures to improve liquidity with G-sap developments and other rates left unchanged, the bullish sentiment will continue in the market, experts feel. The vaccination pace coupled with a decline in daily fresh cases will act as a positive for the economic recovery ahead and the reopening of economic activities later this month will provide more relief, they added.

"A normal monsoon, unlock measures and the vaccination drive will help economic recovery, the second wave prompted a downward revision for the FY22 growth estimate. The risk of inflation persists but it is likely to remain largely with the mandated target of the central bank,” said Nish Bhatt - Founder & CEO - Millwood Kane International.

The FII funding and positives from the Covid scenario have recently lifted the Nifty-50 to scale its lifetime high of 15,733.60. Given the sustainability in the foreign fund inflows and other positives, the markets will further continue the rally to mark historical levels, said experts.

Tracking the weekly performance of the markets, the BSE Sensex had gained 1.32 per cent this week and witnessed a jump of 677.17 points, while the Nifty-50 gained 1.52 per cent or 234.60 points during the week.

The broader markets have witnessed a massive surge during the week backed by sustained buying from investors. The BSE Midcap index has gained 3.92 per cent in the entire week and the Smallcap index advanced 3.34 per cent.