Posted By : Kishore B.S
After the most awaited Inflation data last Thursday, the markets got a whiff that the RBI has little comfort for aggressive rate cut and that only 25 bps could be happening to bolster the sagging economic growth rate reflected by the weak IIP data for two consecutive months.
But Mr. Subbarao likes to surprise the markets everytime during the last 2 years of his tenure and has reacted exactly in the opposite direction of the market expectations, wherein he responds with a Rate hike when markets expect a Cut, and delivers overboard Cut when the market expects a fractional cut and No Change when the markets exepcts an aggressive cut or Increase.
The same trend emerged today again with Him announcing a No Change stance when the markets and Industry veterans where largely pinning for an Aggressive Cut in order to bolster the Economy reeling under the highest interest rates in the world.
The Indices which opened largely with a Positive Gap due to the Positive news from Euro especially Greece and hopes of cut in rates by RBI sank deeply after the announcement to loose nearly 160 points from the days high and made some recovery during the last hour of the trading session to retrace some of losses to close above the 5050 mark.
The ghost of the Rating has hit us again with the Fitch downgrading India’s rating to BBB- after the market closing and the European markets treading in the negative zone due to the spike in the Spain borrowing cost in the last one week bringing new fears of further Crisis in the Euro zone.
Though our markets have closed near the support zone of 5050 and also the 5000 mark after the downgrades today and negative Euro news the downtrend might continue so some extent during the tomorrows trading session as well, which would get confirmed post the opening and trading of the US markets…………
(Inputs Mr. Hemanth .V, Faculty TA, Stock Market Institute, Bangalore)