Domestic stock markets extended gains on Friday after the Reserve Bank of India announced a series of measures to boost liquidity in the banking system while keeping the key rates on hold citing inflationary pressure. The Sensex index rose as much as 386 points to 40,568.91 at the strongest level of the day, and the broader Nifty 50 benchmark moved above its important psychological level of 11,900. Both indices climbed to their highest intraday levels recorded since February 20, boosted by HDFC, HDFC Bank, ICICI Bank and Axis Bank.
At 11:54 am, the Sensex traded 355 points higher at 40,534 and the Nifty was up 92 points at 11,926.
The central bank chief announced on-tap Targeted Long-Term Repo Operations (TLTRO) with tenors of up to three years for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate.
"The scheme will be available up to March 31, 2021 with flexibility with regard to enhancement of the amount and period after a review of the response to the scheme. Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial papers, and nonconvertible debentures issued by entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020," Mr Das said in a virtual address to the media.
The RBI's status quo on policy rates was in line with market expectations, according to analysts.
The RBI "continued to highlight that it will watch the developments closely and continue with its accommodative stance as and when needed for 2020 as well as 2021", said Amit Shah, head of India Research, BNP Paribas.
The RBI Governor said the country's gross domestic product may break out of the coronavirus-induced contraction and turn positive by the fourth quarter of 2020.
While the central bank has slashed rates by 115 basis points since late March in response to the COVID-19 pandemic, which caused Asia's third largest economy to shrink by nearly a quarter in April-June, analysts have called for more fiscal stimulus to revive the economy.
Banking and financial services shares witnessed strong buying interest following the RBI Governor's announcement on additional liquidity for the system. Seven of 11 sector gauges compiled by the National Stock Exchange traded higher, led by the Nifty Bank index - which was up more than 2 per cent gain.
Financial services, private bank and PSU bank indices rose 1.4-2.4 per cent each.
On the other hand, the Nifty FMCG index was the top sectoral loser, down 0.51 per cent.
Mid- and small-cap shares traded on a subdued note, with the Nifty Midcap 100 index up 0.2 per cent while the Nifty Smallcap 100 barometer was flat.
HDFC was the top Nifty gainer, rising as much as 3.55 per cent to Rs 2,018 apiece on the BSE. HDFC Bank, ICICI Bank, Larsen & Toubro, Axis Bank, Bajaj Finance, State Bank of India, Shree Cements, Bharat Petroleum and Indian Oil were among the gainers.
On the contrary, Tata Motors, Asian Paints, Grasim Industries, SBI Life, UPL, Hindustan Unilever, Nestle India, Bajaj Auto and Hindalco were among the losers.
Overall market breadth was neutral, as 1,201 shares fell against 1,138 that rose on the BSE.