Stock, money mkts betting on RBI rate cut tomorrow: Udayan

The global markets scenario continues to remains tough. The picture remains uncertain as volatility has picked up. Investors continue to remain worried over rising Spanish bond yields and a slowing China.

The dollar Index remains above 80 which is another worry while crude has cooled off a bit but remains worrying nonetheless. Then you have on good days again you talk about how the ECB will sort of smoothen out the ruffled feathers in the eurozone.With world markets flitting violently between risk-on and risk-off, market analysts and traders are looking out for the next trigger.
Meanwhile, it is the start of a very important week for our stock market. The key is what will take place tomorrow.
CNBC-TV18’s managing editor Udayan Mukherjee says there is a genuine chance of a rate cut, courtesy the RBI. This is something that money markets and the stock market have priced in. Even though the current economic scenario is tough, he says money markets and indices have factored in the apex bank going ahead with a 25 basis point rate cut at least.
Earnings figures have been lacklustre so far. Infosys was a huge disappointment with its low guidance for the year and next quarter. This week the big numbers coming out are Reliance Industries and HDFC Bank.
Inflation numbers are also due today. But Mukherjee isn’t a believer in the numbers that come in and questions if even the RBI is taking it into consideration and says these numbers have lost relevance. “RBI and every analyst on the street know this is not the real inflation numbers at this point in time,” he adds.
It looks for a moment that the RBI might deliver its verdict with the Nifty floating around 5,400, which then would have had the chance to propel it back to that 5,600 zone but if that event is happening closer to where we are now 5,200 thereabouts then Mukherjee sees the chances of going back to 5,400 even in case of a rate cut and beyond are that much lower.
Can all these events break the Nifty from its current range remains to be seen. Friday’s Shocker
The market showed a lot of resilience in the morning after the bad news hit the market, namely Infosys which came down 10%. The Nifty remained in the green and then suddenly there was a sell-off in the afternoon, which took the Nifty down to 5,200. All of this might have rattled sentiment quite considerably because that was not the way the market was shaping up in the morning on Friday.
The resilience on the SGX Nifty is probably the reluctance to sell ahead of an event, which most people on the market feel will turn out in the market’s favour in the near-term. When you have that kind of a possibility, the bears will be very leery of going aggressive about pressing sells in the market knowing that they might be caught out tomorrow.
Even where there are shorts, it is stock specific rather than being very market specific and that is probably the reason why the Nifty has a good chance of floating around the 5,150-5,200 that is the 200 day moving average (DMA) for the next 24-36 hours.