Market Recap for 9th October

▲ Nifty: 11,914 (+0.67%)    ▲ Sensex: 40,509 (+0.81%)

Hi there!

Today, the banking sector stocks single-handedly helped the index to rise for the seventh consecutive session. Both the Nifty Private Bank (+2.6%) and the Nifty PSU Bank (+3.1%) indices responded positively to the accommodative and pro-growth stance of the RBI. Among individual stocks, ICICI Bank (+4%), Axis Bank (+3.7) and SBI (+3.6) were top banking gainers.

Here are the top stories of the day.

RBI expects GDP growth to turn positive from Q4

As expected, the RBI in its monetary policy committee (MPC) meeting today left key rates unchanged and continued the accommodative stance.. RBI expects the GDP growth—which had nosedived by -23.9% in Q1 FY21—to turn positive from Q4. For the first quarter of FY22, RBI expects a bumper recovery of 20.6% (thanks to the low-base effect! The RBI’s accommodative stance supported rate-sensitive sectors such as banking today. The Nifty Bank index rose 3% today.

RBI eases housing loan norms

To boost the Indian real estate sector, the RBI has eased the risk weightage norms for new individual home loans till 31 March 2022. Typically, banks are required to set aside a minimum capital against a loan, calculated on the basis of risk weightage. Based on the new risk weights, banks will be required to set aside lower capital against the loans, which will be based on loan-to-value rather than the loan amount. This move will allow banks to set aside lower capital on big-ticket loans. Further, the RBI has extended the scheme of co-lending to all non-banking financial companies (NBFCs), whereby an NBFC and a bank can jointly offer a loan. These measures triggered strong buying in housing finance companies such as Repco Homes (+6%), LIC Housing Finance (+7%), PNB Housing Finance (+5.8%).

L&T sees light at the end of the tunnel

Having climbed 3.2%, Larsen & Toubro (L&T) was among the day’s top gainers in the Nifty50 stocks. Looking at returns since the start of lockdown in India, L&T has grossly underperformed the Nifty50. The stock has gained 28% while the benchmark index has risen 56%. L&T’s dismal revenue growth in Q1 (-28% YoY) reflected the impact of the lockdown. However, as the lockdown restrictions ease and business conditions improve, the macro investment cycle is expected to pick up. The company has recently bagged multiple orders, each in the range of ₹1,000–2,500 crore. This news could revive investor interest in this stock.  

Closing bell

Although the market was up today, the breadth was slightly negative (26 of the Nifty50 stocks declined) and performance was skewed towards the banking sector. Further, the Nifty50’s rise over the last two weeks makes it vulnerable to profit booking. The India VIX (volatility index) risen 11% in this week, which indicates volatility ahead. 'Caution’ could be the buzzword as the markets open next week.