Indices hit new highs on GDP revision, political stability

The bulls were firmly in control on Friday as higher GDP growth forecast, dovish commentary from RBI and hopes of political stability at the Centre took the benchmark indices to fresh all-time highs.

The Reserve Bank of India revised its GDP growth forecast to 7.2 per cent for 2024-25 from 7 per cent earlier. Coalition partners pledged their support for the BJP-led National Democratic Alliance, with Narendra Modi as leader.

The European Central Bank cut interest rates by 25 bps, for the first time in nearly five years, reviving hopes that the US Fed may follow suit in September. Brent crude oil prices declined for the third straight week as the latest OPEC+ decision raised concerns over possible supply surplus.

The Sensex rose 1,618 points or 2.16 per cent to close at 76,693 on Friday, while the Nifty settled at a closing high of 23,290. Poor poll results in Uttar Pradesh were a major setback for the BJP, triggering a panic fall on Tuesday. The Nifty, however, has staged a comeback in the last three sessions, up 6.4 per cent, the highest three-session gain since February 2021. The index rose 3.4 per cent during the week, recouping all losses made on June 4.

All sectors ended in green on Friday with IT being the biggest winner, up more than 3 per cent, followed by interest sensitive sectors such as auto and real estate. Nifty VIX, a fear gauge, dropped to a one-month low of 16, signalling reduced market anxiety over government formation.

Vinod Nair, Head of Research, Geojit Financial Services, said: “The anticipation of stability within the coalition government at the Centre and the RBI’s upward revision of its growth forecast fuelled a broad-based rally. Though the last mile towards the inflation target remains sticky, investors are expecting the MPC to be one step closer to the easing cycle.”

FPIs were buyers on Friday to the tune of ₹4,391 crore even as domestic institutions sold ₹1,289 crore.

Most Asian indices were in the red on Friday, with Jakarta Composite the top loser. US jobless claims data came in at 229,000, slightly above the expected 220,000.

The government’s 100-day agenda and allocation of key cabinet portfolios will provide cues next week. Short-term trend for the Nifty remains strong, with resistance at 23500 and 23900 levels and support at 23000.

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