RBI Monetary Policy to dictate market trend; Nifty PE at historical high: What should be your approach?

In the last trading session, Sensex reclaimed its milestone level of 40,000 after almost 7 months, while Nifty regained its 11,800 mark. With this, Nifty is trading at an exuberant historical PE ratio. Definitely, the technical trend of the index in an upward trajectory but one should not forget this fundamental fact that PE is at historical highs.

The important event, which could dictate the market direction today, is the RBI Monetary Policy. The Street’s consensus is that policy rates may remain unchanged as the inflation is beyond 6 per cent mark. What market participants would look forward to is the commentary of the RBI Governor and whether it maintains its accommodative stance or not.

While the opening is likely to be strong, the traders are advised to be cautious as the RBI policy may induce some volatility, and also, the weekend factor may invite some degree of caution in the second half. Nifty has immediate support around the 11,790 mark. SGX Nifty trades at 11,873 mark, up by 24 points.

The lists of Security in the F&O ban for today got bigger with four stocks in ban i.e. Adani Enterprises, BHEL, IDEA, and VEDL. 

Most of the indices in Asia were trading in the green on Friday on the back of a positive close overnight on Wall Street. China’s Shanghai Composite, which has resumed trading after a long holiday, has surged 1.57 per cent, while Hong Kong’s Hang Seng is trading just above the neutral line, up by 0.03 per cent. Japan’s Nikkei 225 has slipped from its day’s high and is now trading with a minuscule loss of 0.11 per cent.

Continuing with the winning streak, the Indian benchmark indices rallied for the sixth straight day on Thursday led by HDFC Bank, Infosys, and TCS. At one point of the day, Sensex and Nifty were trading above their psychological levels of 40,400 and 11,900; however, the profit booking in the last leg of the trade resulted in ending the day below these levels. Despite this, Sensex and Nifty rose 0.76 per cent and 0.82 per cent, respectively. A divergent trend was witnessed in the broader markets with Nifty Mid-cap adding 0.10 per cent, while Nifty Small-cap dipped 0.23 per cent. Talking about the sectoral performance, Nifty IT and Nifty Pharma were the standout performers whereas, Nifty Media and Nifty FMCG ended with modest losses.

US stocks extended its northward journey on Thursday amid hopes of further fiscal relief measures. Dow and Nasdaq added 0.4 per cent and 0.5 per cent, respectively, while S&P 500 rose 0.8 per cent. In the economic news, weekly initial jobless claims came in above estimates but down to 8,40,000, a decrease of 9,000 from the prior week’s upwardly revised 8,49,000 level. European markets also closed higher, aided by renewed optimism of fiscal stimulus in the US.