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RBI rate cut fails to cheer markets; Nifty ends below 10,100 mark

All that happened in Wednesday's trade

SI Reporter  |  New Delhi 

MARKET OUTLOOK: Jayant Manglik, President, Retail Distribution, Religare Securities    We're seeing early sign of exhaustion in Nifty and possibility of profit taking or consolidation is high now. However, the overall trend will remain positive and there'll be no shortage of trading opportunities on stock specific front. We suggest using any intermediate correction for accumulating quality stocks on dips. Nifty has strong support at 9,900. Plan your trades accordingly COMMENT: Motilal Oswal, CMD, Motilal Oswal Financial Services   RBI has been facing this challenge of non-transmission for a while, but a silver lining is developing at the macro level where the Forex reserves of India are becoming big. Large forex reserves eventually will ensure fall in currency premiums and that will result in foreign capital flowing into the economy at substantially lower rates. This will happen as global borrowing rates are subdued and currency risks now tapering off will result in lower rates offered in India.   Markets are overheated but reluctant to fall, a huge pile of cash getting built in the system and waiting to be deployed, that will act as a shock absorber at every weakness. We think long term money should be committed at these levels as well. Barring any global event, the outlook is positive NOMURA ON RBI POLICY   Overall, the RBI’s rate decision and its neutral stance are in line with expectations. The neutral stance suggests that the RBI’s decision-making remains data-dependent.   Looking ahead, we expect GST-related growth weakness in June/July and a gradual recovery after August, aided by a resumption of production (after initial GST hiccups), ongoing re-monetisation, normal monsoons and easier financial conditions (lower lending rates, ample liquidity).    Headline inflation bottomed in June and we expect it to rise gradually to above the medium-term target of 4% on higher food prices and statistical factors (HRA increases, adverse base effects). Given our expectation of both growth and inflation rising over the next six to 12 months, we expect a prolonged pause from the RBI AMBIT CAPITAL ON RBI POLICY We expect the RBI to administer 25-50bps of rate cut from hereon over the rest of FY18. Even as CPI inflation is expected to trend higher in 2HFY18, we expect expect the RBI to cut rates from hereon mainly because: (1) the Central Government’s net spends have been heavily front-loaded and hence will slowdown from hereon thereby requiring monetary policy to play a more growth-supportive role  and (2) meaningful pressure is being exerted by the Ministry of Finance on the RBI to cut rates Anand James, Chief Market Strategist, Geojit Financial Services   Given the soft PMI numbers and concerns over GST hassles markets have been expecting a deeper cut, especially as inflation expectations had eased. So it was not surprise that markets looked underwhelmed after RBI’s 25bps cut. Rise in volatility index and FII's restrained approach over last few trading sessions have also been testing investor sentiments.  Deepak Jasani, Head- Retail Research, HDFC Securities on RBI policy   While the 25 bps repo rate cut was in line with consensus expectations, the neutral policy stance of the MPC may disappoint some market participants. A 25 bps rate cut in itself will not result in a large fall in interest expenses for the businesses, therefore, an indication or hint about the future speed and time of rate cuts could have helped sentiments across the board; though the compulsions of the RBI's MPC are well appreciated at this point. Availability of credit may be more important than its cost in times when a large section of the business community is undergoing stress. While the markets may react in a knee-jerk fashion in the extreme near-term, in a day or two, it may come back on its original path, which seems upwards atleast for the next 2-3 weeks.

The benchmark indices ended lower after the Reserve Bank of India (RBI) cut repurchase (repo) rate by 25 basis points (bps) to 6%, the lowest since November 2010. The Sensex and Nifty had hit their respective highs of 32,686 and 10,137, respectively at open.     The rate cut came after a slump in food prices sent June consumer inflation to a more than five-year low of 1.54%, well below the RBI's 4% target and its projection of 2.0-3.5% for April-September.   Overseas, European markets ebbed lower as energy shares pulled back after a ...

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First Published: Wed, August 02 2017. 15:38 IST
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RBI rate cut fails to cheer markets; Nifty ends below 10,100 mark

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RBI rate cut fails to cheer markets; Nifty ends below 10,100 mark

All that happened in Wednesday's trade

The benchmark indices ended lower after the Reserve Bank of India (RBI) cut repurchase (repo) rate by 25 basis points (bps) to 6%, the lowest since November 2010. The Sensex and Nifty had hit their respective highs of 32,686 and 10,137, respectively at open.     The rate cut came after a slump in food prices sent June consumer inflation to a more than five-year low of 1.54%, well below the RBI's 4% target and its projection of 2.0-3.5% for April-September.   Overseas, European markets ebbed lower as energy shares pulled back after a ...

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