Indian shares see best week in a month after RBI assures liquidity

Indian shares closed higher on Friday, rounding off their best week in more than a month, after the central bank kept key interest rates unchanged as expected and promised adequate liquidity to support the economic recovery.

The NSE Nifty 50 index (.NSEI) closed up 0.59 per cent at 17,895.20 and the benchmark S&P BSE Sensex (.BSESN) rose 0.64 per cent to 60,059.06. Both the indexes gained over 2 per cent for the week.

“There should not be any concern about the adequacy of liquidity in the banking system to support recovery or financial markets,” Reserve Bank of India Governor Shaktikanta Das said in his policy address.

“Our entire approach is of gradualism, we don’t want suddenness or surprises,” he said, adding there was no need for conducting more G-SAP or government securities acquisition programme auctions at this point.

The central bank left the key lending rate or the repo rate (INREPO=ECI) steady at 4 per cent, while the reverse repo rate (INRREP=ECI) or the borrowing rate also stayed unchanged at 3.35 per cent.

Some analysts had signalled a slim chance of the monetary policy committee delivering a token increase in the reverse repo rate.

The country’s benchmark 10-year bond yield hit a 17-month high of 6.32 per cent after the decision, while the Indian rupee strengthened and broke the 75 mark, against the dollar after the RBI halted G-SAP purchases.

Analysts said the equity markets were temporarily relieved as the RBI’s tone sounded more dovish than

expected.

“The markets should draw comfort from this guidance and assuage any concerns coming out of a faster than expected policy normalisation,” Tata Capital Chief Executive Rajiv Sabharwal said.

Meanwhile, shares of Tata Consultancy Services (TCS.NS) closed up 1.1 per cent ahead of its September quarter results later in the day. Indian biscuit maker Mrs. Bectors Ltd (MRSB.NS) surged as much as 7.3 per cent after HDFC Securities began coverage of the stock.