February 8th 2024 Stock Market analysis & RBI MPC key points

Market Selloff Despite Anticipated RBI Policy Outcome; Disappointment Over Lack of Rate Cut Hints

Despite the RBI monetary policy meeting meeting expectations, both the Sensex and Nifty experienced a nearly 1 percent decline, erasing initial gains and closing significantly lower on February 8th.

The MPC decided to keep key policy rates unchanged and maintained its stance on withdrawing accommodation to help inflation move closer to the target while still supporting growth.

Nifty experienced a significant decline in the first half, though it attempted to recover losses later on. However, persistent declines in major private banking stocks continued to dampen sentiment. The RBI forecasts real GDP for FY25 to be at 7 percent and CPI inflation at 4.5 percent, contingent upon a normal monsoon. Regarding liquidity management, the central bank stated it would actively utilize a variety of tools to adjust both short-term and long-term liquidity.

The Sensex ended the day down by 723.57 points, or 1.00 percent, closing at 71,428, while the Nifty dropped 212.50 points, or 0.97 percent, to reach 21,718.00. Market breadth was negative with 1,339 stocks advancing, 1,906 declining, and 65 remaining unchanged.

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Technical Outlook on 9th February 2024

Nifty is anticipated to find immediate support levels around 21,834 followed by 21,738, while resistance levels are expected at 22,026 and 22,074. Currently, Nifty is showing signs of recovery from lower levels.

For Bank Nifty, immediate support levels are expected near 44,691 and 44,049, with resistance levels at 45,333 and 45,654. Presently, Bank Nifty is also poised for a recovery from lower levels.

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Derivative Outlook on 9th February 2024 

PCR Analysis: Nifty PCR-OI has decreased with nifty has negative close which shows mild CALL WRITING.

Open Interest Analysis: Nifty future Feb contract OI has increased with negative close which shows Short Buildup.

Cost of Carry Analysis: Nifty FEB month contract has ended in high compare with MARCH contract and high range compare with previous session which indicates a recover from lower levels.

India VIX Analysis: India VIX has closed at 15.83 vs 15.51 (DoD) basis which shows increase in volatility.

February 2024 RBI MPC Meeting: Key Highlights and Outcomes

• Benchmark interest rate or repo rate kept unchanged at 6.5%
• GDP growth for FY25 projected at 7%, lower than 7.3% this fiscal
• The retail inflation is projected to average 5.4% for this fiscal year, with an anticipated decrease to 4.5% by FY25.
• Financial institutions continue to experience incomplete monetary transmission.
• The current economic momentum is expected to persist into the next fiscal year.
• Recovery in rabi sowing, sustained profitability in manufacturing, resilience of services to support economic activity in FY25
• The investment cycle is picking up momentum, with indications of a revival in private sector capital expenditure.
• Rural demand is steadily increasing, while urban consumption remains robust.
• The ongoing uncertainty in food prices continues to affect headline inflation.
• Rising geopolitical tensions are disrupting supply chains and exerting pressure on commodity prices.
• The domestic financial system maintains its resilience with a strong and healthy balance sheet.
• The RBI plans to implement an offline feature in CBDC-Retail to facilitate transactions in regions with inadequate or restricted internet access.
• The exchange rate of the Indian rupee has shown relative stability throughout the current fiscal year.
• The RBI has instructed lenders to furnish borrowers with a Key Fact Statement (KFS) detailing the terms of the loan agreement, encompassing the comprehensive interest costs, for both retail and MSME loans.
• Lenders have been directed by the RBI to furnish borrowers with a Key Fact Statement (KFS) outlining the terms of the loan agreement, encompassing the all-inclusive interest costs, for both retail and MSME loans.
• The upcoming meeting of the Monetary Policy Committee (MPC) is set to take place from April 3rd to April 5th, 2024.