SENSEX NIFTY
Jan 29, 2013, 11.15 AM IST | Source: CNBC-TV18

Nifty unlikely to breach 6,100 even after 25bps rate cut

It is a big day that people have been waiting for in the bond and the stock market. The expectations may have got tempered over the last three weeks, but it is still a big monetary policy and most people on the street expect that this will not be a nonevent.

It is a big day that people have been waiting for in the bond and the stock market. The expectations may have got tempered over the last three weeks, but it is still a big monetary policy and most people on the street expect that this will not be a nonevent and this time something will happen.

Lots of important results like Crompton Greaves, Glenmark, Idea, Sterlite are slatedfor today. Global markets are flat, so today it is between the policy and the earnings that we need to carve out our market reaction, said Udayan Mukherjee, managing editor, CNBC-TV18.

In the last four weeks there have been intense discussions on what it will be from the Reserve Bank, but now that we are down to wire one should dispel probably notions of getting that big 50 basis point (bps) surprise that seems less and less likely, as we get into the policy. If there was any doubt that the Reserve Bank will not pull that bigger trigger yesterday’s document of the review probably gives out that 50 bps is not coming today, if it does, it will hugely surprise the market. Infact it may even shock the market.

So, I think 50 bps you keep aside and say not more than 1-2 percent probability. If that happens all markets will rally, but it’s probably not going to happen that leaves with the other two options to play around with which is the consensus 25 bps, but not the insignificant probability of getting nothing from the Reserve Bank of India (RBI) today.

A small window of that possibility is best toyed with this morning. There is a reasonable probability that the RBI probably on the back of current account deficit (CAD) and inflation concerns stays its hand even this time and wait for the Budget before it presses the trigger.

There is atleast a 25 percent probability of that happening if not higher. It is still majority chance of or highest probability outcome of getting 25 bps, markets are expecting that. But I don’t think between 0-25, we get something which leads to raptures in the market. So, I am hesitant about expecting the RBI to unleash a big rally in the stock and the bond markets today.

Yesterday’s trade was fair, we had a good pullback on Friday, market consolidated in the midcap space. They just paused ahead of the policy because it is really a fine call this time around from the RBI. Traders would not want to stick their neck out and play for that rate cut and then not get it and get disappointed.

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