RBI policy | No surprise in rbi policy

rbi policy | no surprisal in rbi policy

On day two of what’s arguably one of the most necessary weeks of sell in recent times, cnbc-tv18’s managing editor udayan mukherjee, says the reserve bank of india’s credit policy is not the biggest events of all this week and may not spring up a good deal of surprises—the markets may have priced in what has to come.
“the us federal reserve meeting tomorrow may be a game changer for the indices. The market will react to on thursday. And in midst of all of these there are a large total of net income which keep coming in, a good deal of good, a good deal of not so good which the market needs to digest,” he added.

Q: the market won’t be too rattled by the monetary policy today?
A: its unlikely because whether or not you note the last few times the monetary policy has been reduced to be a bit o non-event, so i don’t think that is weighing on the markets mind overmuch. In any case you saw how banks led the rally yesterday so whether or not the market was nervous about the monetary policy it would not have made for the leadership fro the baking sector.
A 25 basis points hike is expected. Whether or not it comes through market will be very nervous or react, i doubt that very much. Whether or not it does not come through may the market pop a little bit because of the relief component, i think that is also rather likely but whatever way the affect is no more that 30-40 points for the nifty either plus or minus. So i don’t think this is a make or break event for the market.
Anyway the investors have a sense of what’s coming for fiscal year 2011 in terms of how much more tightening and no one expects overmuch more tightening whatever happens today after that unless inflation remains stubbornly high. We are okay with the monetary policy. As i said it’s a 30-40 point nifty event no more than that.
Q: the market has bigger things on its mind?
A: yes, tomorrow is the day of reckoning particularly because its been advertised so much; every one on the street is discussing qe2 and therefore the issue has assumed a ratio which is bigger than what it deserves to be. My own feeling is that like the credit policy it’s in all likelihood a 30-40 point event for the nifty. The qe2 is in all likelihood a 5-7% for the stock market. Overmuch is being made of it; overmuch is benign spoken about it. Is it not relevant for liquidity? —not rather but it’s a tactical event. I don’t think it will structurally alter either worldwide or local markets.
So could you get a 5% pop whether or not it comes about? —sure it could. Could it ensure that the liquidity over the next few months remains benign? —that is also true.
Whether or not it does not come about, whether or not it’s half a trillion dollars will the world come to an end? —i doubt it very much. We will have a correction or a reaction in worldwide markets, we will also follow but i don’t think it’s an event which will break or alter the trajectory of the market to a degree. We must just keep this in position because every one on the street is discussing qe2 and half or one trillion has turned into the large talking point.
But you will find that it will come and go may be beyond 2-34 days, it may not affect the market overmuch. Only for the near-term today the coal india refund comes in, so maybe we will just work around that particularly in a context where the domestic syndication seems to have eased over the last couple of days. Whether or not you consider the domestic foundations sell figure that has come off. Yesterday was just about rs 70 crore. Leastwise that pressure looks being easing off the markets back.
Q: what about the nifty this morning?
A: it’s necessary to realise that the market knows about the two scenarios and whenever that happens, the prospective for a monumental reaction on either side is diminished. Whether or not the fed were to come about with a usd 3 trillion kind of number or zero—i think that would qualify now as an astonishment. But usd 500 billion or usd 1 trillion won’t qualify as an astonishment. The market will discount it and that discounting will take a day or two to happen. It’s not a lehman kind of surprise, which will happen of a sudden and the fed will say, “no, i am going to raise interest rates” or something like that. The market knows about the options. The fed ordinarily prepares the market for what’s to come not alike to our central bank and therefore the reactions are rather modest.
You just must consider the cries of qe2 have become so shrill over the last few days and will in all likelihood rise more because of all the media hype around it that i think the investors may make faults leading upto that event and particularly in the reaction. Just on the nifty, i think it started the week well, whether or not it was on reverse gear on friday morning.
It has come back to leastwise neutral gear now or maybe even first gear at 6,100 but to get to fourth gear or full throttle, i think it unquestionably requires a little bit of help from the fed in the near-term because you have seen in the past this getting beyond 6,200-6,250, i think the market is in all likelihood saying it’s not ready for it yet but you got a large total of events, the coal india cash is hanging in there after today, whether or not you get an astonishment, may a good deal of of it on the margin – you don’t need all of it, even the little sliver of it to get invested in the couple of days and you may see the market at new highs.
It’s an interesting circumstance. Just in the near-term we will have to wait for tomorrow night and see what the fed delivers and take it from there. But i think the market after today getting into that event will in all likelihood hang somewhere between 6,050 and 6,150 those kind of levels.

Source: moneycontrol

Posted by musicking on Nov 2 2010. Filed under Business news. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry