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Markets continue to trade higher post RBI policy decision.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.

Equity indices continued their rally in morning trade on Thursday after the Reserve Bank of India opted for a pause second time in a row, maintaining key benchmark policy rate at 6.5 per cent as inflation moderates.

Fresh foreign fund inflows in the domestic equity market also added to the optimism.

The 30-share BSE Sensex climbed 174.2 points to 63,317.16 in morning trade after the monetary policy announcement. The NSE Nifty advanced 49.2 points to 18,775.60.

From the Sensex pack, NTPC, Power Grid, Larsen & Toubro, HDFC Bank, IndusInd Bank, HDFC, State Bank of India, ICICI Bank, UltraTech Cement, Tata Steel and Reliance Industries were the major gainers.

Kotak Mahindra Bank, Mahindra & Mahindra, Tata Consultancy Services, Nestle, Axis Bank, HCL Technologies, Wipro, Tech Mahindra and Hindustan Unilever were among the laggards.

The Reserve Bank of India on Thursday opted for a pause second time in a row, maintaining key benchmark policy rate at 6.5 per cent as inflation moderates.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.

“RBI staying on a pause and maintaining its stance was in line with expectations,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading lower.

The US markets ended mostly lower on Wednesday.

“The MPC maintained unchanged interest rates, as expected. The market had already factored in this policy, maintaining its bullish momentum,” Santosh Meena, Head of Research, Swastika Investmart Ltd said.

Global oil benchmark Brent crude dipped 0.27 per cent to USD 76.74 a barrel.

Foreign Institutional Investors (FIIs) bought equities worth Rs 1,382.57 crore on Wednesday, according to exchange data.

The Sensex had climbed 350.08 points or 0.56 per cent to settle at 63,142.96 on Wednesday. The NSE Nifty advanced 127.40 points or 0.68 per cent to end at 18,726.40.

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Bank Nifty F&O expiry day change may benefit brokers, NSE, govt, but not traders as much; may reduce volatility.

Except for Monday, NSE will now have an F&O expiry on every day from next week. There is the Nifty Financial expiry on Tuesday, Nifty Midcap Select on Wednesday, Nifty 50 on Thursday and now Bank Nifty on Friday.

NSE’s move of shifting Bank Nifty’s Futures and Options (F&O) expiry from Thursday to Friday has surprised traders. The changes will be effective from the trade date of Friday, July 7, 2023; accordingly, all existing contracts with Thursday expiry will be revised to Friday by the end of the day on July 6, 2023. The first Friday expiry will be on July 14, 2023, according to NSE. With this change, NSE will now have an F&O expiry on every day of the week except Monday, with effect from the week starting July 9. There is the Nifty Financial expiry on Tuesday, Nifty Midcap Select on Wednesday, Nifty 50 on Thursday and now Bank Nifty on Friday.

Earlier last month, BSE also changed the expiry day of Sensex and Bankex monthly, weekly and long-dated futures and options contracts to Fridays from Thursdays. Analysts believe that NSE has taken this decision to counter BSE while noting that changing the expiry day alone won’t increase the attractiveness of Bank Nifty as transaction charges will also play a significant role. Nifty 50 and Bank Nifty take cues from each other, especially during expiry days, resulting in heightened volatility, the move may help reduce volatility.

NSE shifted expiry day to counter BSE
“The NSE’s decision to shift the expiry of Bank Nifty to Friday can be viewed from two perspectives. Firstly, BSE F&O contracts, which expire on Friday, have gained popularity among traders due to lower charges than NSE. To counter this competition, NSE introduced the idea of shifting the expiry day. Secondly, NSE’s previous successful experiment with the Finnifty’s new expiry day may have influenced this decision,” said Santosh Meena, Head of Research, Swastika Investmart Ltd. He further said that expiry alone may not be the sole factor determining attractiveness; transaction charges will also play a significant role, especially considering the appeal of BSE Sensex F&O contracts.

Different expiry days will help in reducing volatility

“Though Bank Nifty is a thematic index while Nifty is a broad-based index, and though both differ in terms of volatility and price ranges, they are often traded in tandem, with each taking cues from the other, especially during expiry day fluctuations. However, once expiry days become different, it is possible that such a link might diminish. This move is more significant than any of the other similar changes wart expiry days brought in for Fin nifty or that of BSE indices etc., as Nifty and Bank Nifty constitute the lion’s share of derivative volumes,” said Anand James, Chief Market Strategist at Geoje Financial Services. He further said that one could argue that too much may not be good, as now one would have to spare the heightened allocation of resources in terms of attention, research, time etc. to yet another day.

Same expiry day will make it easier for investors to adjust their trading positions

“As NSE looks to gain a competitive advantage over BSE, the Nifty Bank expiry has been shifted to Friday. This will not impact Nifty Bank traders in any way but if both BSE & NSE had the same day as the expiry day would have surely made it easier for investors to remember and accordingly adjust their trading positions,” said A R Ramachandran from Tips2trades.

Brokerages, exchange and government will gain from different day expiry

“Traders will utilize their capital in a more efficient manner if Nifty and Bank Nifty expire on different days; brokers will earn more brokerages, exchange and government will earn more transaction charges and STT,” said Mitesh Karwa, Research Analyst at Bonanza Portfolio Ltd.

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Rupee rises 33 paise to close at 82.42 against US dollar

On Wednesday, the rupee closed at 82.75 against the US currency.

The rupee appreciated by 33 paise to close at 82.42 (provisional) against the US dollar on Thursday, as positive macroeconomic data strengthened investor sentiments.

At the interbank foreign exchange market, the local unit opened at 82.54 against the US dollar and settled at 82.42 (provisional), up 33 paise over its previous close amid sustained foreign fund inflows.

During the day, the domestic unit witnessed an intra-day high of 82.36 and a low of 82.54.

On Wednesday, the rupee closed at 82.75 against the US currency.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.20 per cent to 104.12.

Global oil benchmark Brent crude futures advanced 0.17 per cent to USD 72.72 per barrel.

“The Indian rupee strengthened amid stellar economic data and foreign fund inflows. It has clocked the best single-day gain in almost two months following dollar inflows and lower commodity prices,” Dilip Parmar, Research Analyst, HDFC Securities said.

Foreign institutions bought USD 4.5 billion of domestic stocks in May, the most since November.

Though the spot USDINR fell on Thursday, technical is signalling a continuation of the bullish trend, Parmar said, adding that looking ahead, traders will eye on Friday’s US payrolls data ahead of the Federal Reserve’s June meeting.

On the domestic equity market front, the 30-share BSE Sensex declined 193.70 points or 0.31 per cent to end at 62,428.54 points, and the broader NSE Nifty fell 46.65 points or 0.25 per cent to 18,487.75 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital market on Wednesday as they purchased shares worth Rs 3,405.90 crore, according to exchange data.

On the domestic macroeconomic front, manufacturing activities in India advanced further and touched a 31-month high in May supported by stronger increase in new orders and favourable market conditions.

Meanwhile, the Centre’s fiscal deficit narrowed to 6.4 per cent of the GDP in 2022-23 from 6.71 per cent in FY22.

Unveiling the revenue-expenditure data of the Union government for 2022-23, the Controller General of Accounts (CGA) said the fiscal deficit in absolute terms was Rs 17,33,131 crore (provisional), marginally down from the amount projected in the Revised Estimates (RE) in the Budget.

Moreover, according to official figures released on Wednesday, India’s economy grew by 6.1 per cent in the March quarter of 2022-23, pushing the annual growth rate to 7.2 per cent on account of better performance by agriculture, manufacturing, mining and construction sectors.

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