Stocks surge, bond yield up
Stocks gained and bond yields surged soon after the Reserve Bank of India raised the policy interest rate by 50 basis points. The Sensex rose by 89.13 points at the end of trading while the 10-year bond yield rose by 15 basis points to 7.30 per cent. Bond prices move inversely to yields. During intra-day trades, the 30-share Sensex rose 350.39 points, or 0.60 per cent, to 58649.19.
Similarly, the broader NSE Nifty rose 15.50 points, or 0.09 per cent, to close at 17397.50. While interest rate-sensitive stocks saw a mixed reaction, market circles said the positive close came as the 50 basis point increase was in line with expectations. Another factor was the retention of the growth guidance at 7.2 per cent for this fiscal and comments from RBI Governor Shaktikanta Das that inflation has peaked. One more reason behind the stock market holding up despite the rate increase was the participation of foreign portfolio investors.
However, at the bond markets, yields inched up as the RBI’s action was seen as hawkish. Market participants were largely expecting a 35 basis point increase in the repo rate. Yields on the benchmark 10-year paper settled at 7.30 per cent against the previous close of 7.16 per cent. Meanwhile, the rupee gained by 23 paise to close at 79.24 against the dollar.