RBI Drops the Rates, Hard!

Grab your chai ☕︎! Let's dive into the weekly buzz of the Indian stock market.

Hello🙋‍♂️!

We are here with the 80th edition of ‘Sharpe Insights.’

This week, we had two major macro events. One in India and one in the USA. We had the RBI MPC meeting, and the outcome surprised many. The MPC decided to cut the repo rate by a whopping 50 basis points. They also reduce CRR by 100 basis points. This will lead to a huge boost in the liquidity, and your loans (if you have any) may get cheaper. We wrote a detailed thread about this. You can read it here.

The other important update was on the USA job data, which was positive (above expected), and markets cheered the news.

Apart from that, the Q4 results season has ended. We are going to have a YT live session next Saturday where we will discuss the results season in more detail. Subscribe to our YouTube channel now so you don’t miss out!

We have a lot to uncover this week. So, without wasting any time, let’s dive in!

Global Macro Factors🌍

The global macro factors were mostly neutral this week with a negative bias. Crude oil spiked after a solid fall in the last month, and it is now trading near the $66.65 mark. Gold also moved up 1.28% this week. It is now trading at $3331!

The dollar index was marginally up and is currently hovering near the 99 mark. The rupee fell marginally as USD INR moved up by 0.25% during the week. The US 10-year Treasury Yield also rose this week. It is now at 4.51% vs 4.43% last week.

The S&P 500 was up by a solid 1.5%. Now, it is trading above 6000 for the first time since February. On the domestic front, India’s forex reserves dropped by $1.24 billion to $691.485 billion for the week ended May 30, the Reserve Bank said on Friday.

Market Performance📈

Indian markets also cheered the news of the rate cut on Friday. But there was a bullish sentiment during the week. All the key broader market indices ended the week in the green. And all of them rallied 1% or more!

The Nifty 50 was up by 1.02% during the week. The Nifty 100 was up by 1.16%. Nifty 500 increased by 1.59%. While the Nifty Midcap 100 was up by 2.77% this week, the Nifty Smallcap 100 ended the week with gains of 3.91 % and was the top gainer of the week. Market breadth was also strong, as 70 to 80% of stocks across indices ended the week in green.

If we talk about stocks, Eternal and Swiggy were the top gainers among the Nifty 50 and Nifty 100 names with weekly moves of 9.9% and 11.82%, respectively. Astrazeneca Pharma and Cochin Shipyard topped the chart among Nifty 500 and Nifty Midcap 100 names as they rallied by 22.8% and 22.03% this week. Brainbees Solution was the top gainer in the Nifty Smallcap 100 names.

Sector Analysis📊

This week, we saw a broader bullishness on the sectoral level as well. All the sectoral indices except IT and Media ended the week in the green. Eleven indices ended the week with gains of at least 1%.

Nifty Realty was the week’s top gainer as it spiked by 9.51%. Nifty Metal and Consumption completed the top three. As we mentioned in our thread, realty, auto, and BFSI are likely to benefit from the rate cut decision.

Now, let’s discuss market breadth. We gauge it by looking at the percentage of Nifty 500 stocks trading above their 50-day EMA. This week, we saw a continuation of bullishness. Last week, this number was 79%. This week, the number jumped to 82%. We believe anything between 30 and 70% is healthy for the market. So, the market breadth looks healthy but slightly heated in the short term.

Sectors To Watch

Many premium members are using RRG charts on sharpely. It helps you to find strong sectors and stocks based on relative strength and momentum. You can check it out here. Now, let’s see what it says this week.

We can see that many sectors are in the improving and leading quadrants (purple and green ones). And this shows the current healthy state of the market. Some are firmly in the leading quadrant on the right side. Keep an eye on Banking and finance stocks (both public and private). They are showing high relative strength and momentum. Oil & Gas and PSE names are also looking good. On the other hand, IT, Healthcare and metal are in the lagging quadrant at the moment.

On the RRG chart, you can also compare stocks from these sectors to find the strong ones! Finding the right sectors and stocks can’t be easier than this! So check this tool out now!

That’s it for this week, folks. See you next Sunday!