SENSEX NIFTY
Jan 29, 2013, 09.32 AM IST | Source: Moneycontrol.com

Morning capsule: Cues you should know on RBI credit policy

The US markets closed mixed as stocks struggled to extend the January rally for another session.

Moneycontrol Bureau

The US markets closed mixed as stocks struggled to extend the January rally for another session. Apple led tech stocks higher with a 2 percent rebound while Caterpillar gave support to blue chips following its earnings report. The CBOE volatility index (VIX) traded near 13.5. European equities too ended mixed.

In economic data, pending home sales fell 4.3 percent in December from the previous month. Durable goods orders report was more encouraging rising 4.6 percent in December versus 0.8 percent gain in November.

In key data to watch out for in the US today, the US Federal Reserve begins its 2-day policy meeting today. Consumer confidence is expected to remain unchanged at 65.1 levels. Also watch out for data from the S&P Case-Shiller home price index.

European equities ended mixed. Asian markets were subdued in morning trade.

Currency

In other asset classes, the euro steady above 1.34, the dollar index stays sub 80 levels.

Commodities

In commodities, Brent crude stays above USD 113 per barrel following tightening fuel supplies in the US. From the precious metals space, gold stays near 2 and a half week lows as promising u-s economic data boosted optimism about an economic recovery driving investors away from safe-haven assets.

Back home, benchmarks Sensex and Nifty rolled out a dull trading day on Monday, void of any action ahead of an action-packed week. The 30-share BSE Sensex and 50-share NSE Nifty closed absolutely flat at 20103.35 and 6074.85 respectively

RBI policy

The market is clearly positioned for a rate cut from the RBI governor. According to a CNBC-TV18 poll, 95% of the respondents expect a rate cut; of which 90% see a 25 bps cut and 5% a 50 bps cut. Expectations on a CRR cut are less intense. Only 30% expect a CRR cut; 70% said the governor may prefer using OMO or open market purchase of bonds to bring liquidity.

On the governor's policy stance 50% thought he would be more dovish, given the state of the economy; 50 % thought his stance would continue to be dominated by inflation and deficit concerns.

On the inflation front, 50 percent of the respondents expect inflation forecast to remain unchanged at 7.5% while the remaining 50 percent feel it to be scaled down to sub 7.5%. On GDP, 60% of respondents said the governor may scale the full year forecast to below the prevailing estimate of 5.8%.

Meanwhile, in the macroeconomic review, RBI says the widening current account deficit is a constraint on monetary policy easing. RBI expects growth to revive from the fourth quarter of this fiscal and expects inflation to moderate. But the central bank also continues to maintain that inflation remains above the comfort zone.

Earnings central

According to a CNBC-TV18 poll, Crompton Greaves may see only a marginal improvement in sales, as the problems persist in the power division. Profits may see a 1 percent decline.

Glenmark's bottomline is seen higher at Rs 181 crores year on year as they will receive a USD 9 million upfront income on account of the licensing deal they signed with Forest Labs.

Telecom player Idea will also reports numbers today.

READ MORE ON  US markets, Apple, CBOE volatility

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