The Indian benchmark indices, Sensex and Nifty, are expected to open flat on Thursday. Gift Nifty at 24,175 indicates a marginal rise at open, as Nifty futures on the NSE on Wednesday closed at 24,366.45. According to analysts, the focus has now shifted to the RBI monetary policy outcome. The central bank has kept rates unchanged at 6.5 per cent for the last 18 months, and analysts expect yet another status quo stance.
Madhavi Arora, Chief Economist at Emkay Global Financial, said that even as domestic dynamics have changed a little from expected lines, there is a lot to digest for the MPC as it meets this week. While the global Goldilocks narrative suddenly moves to that of a growth scare and deep Fed cuts, massive volatility in global risk assets, led by the unwinding of the Yen carry trade, risks spillover to domestic financial stability as well.
“The fluidity of global narratives and policy repricing, in conjunction with surplus banking liquidity, noisy food inflation back home, and a still-elusive 4% inflation target, make it tricky for the RBI to find a balance in its policy biases. Staying relatively hawkish will only create an unwanted INR carry, and increase the problem of plenty for the RBI. We continue to see easy/surplus system liquidity in H1. While the upcoming policy may not see any rate action, issues like 1) case and timing of policy pivot/stance change, and 2) factors influencing liquidity management ahead would be key for markets,” she said.
According to her, the policy tone should be soft, recognising emanating macro forces and market risks. While curve steepening looks to be a popular trade, the consistent repricing of Fed cuts and further unwinding of the Yen carry trade could spill over into the RBI’s reaction function and will be cyclically noisy for bonds/FX, in our view,” she further added.
Meanwhile, global stocks turned volatile again and dipped further. Following overnight weakness in the US markets, Asian stocks were weak between 0.5 per cent and 1.25 per cent in early Thursday trading.
Dhupesh Dhameja, Technical Analyst, SAMCO Securities, said: After enduring four sessions of decline, the benchmark index closed in positive territory. “Recent options market activity indicates a shift towards bullish sentiment, with more put options being written than calls. This change breaks a two-week streak of call writing, signalling positive signs for the index. Significant open interest is observed at the 25,000 call (1.42 CR) and 24,000 put (86.81 lakh), with notable interest in 24,100-24,200 puts and 24,400-24,500 calls. The Put-Call Ratio (PCR) increased from 0.48 on Tuesday to 0.70, indicating lingering bearish sentiments in the market. The Max Pain Point anchored at 24,350, guiding the index’s movement,” he said.
The India VIX decreased significantly by 13.73%, settling at 16.17, down from 18.74 on Tuesday. This reflects the market’s reaction to global cues, which has settled down.
Hrishikesh Yedve, AVP Technical and Derivatives Research, Asit C. Mehta Investment Interrmediates Ltd, said: Technically, the index has been taking support near 24,000 levels and maintaining the 50-DEMA support despite the turbulence, resulting in a relief rally. 50-DEMA is currently near 23,980, and as long as the index holds above it, a relief rally is likely to continue.