Post CRR cut, will market rally go on? Experts debate

Moneycontrol Bureau

If investors were looking out for some cushioning to play the market today, they got it in the form of a 50 basis point Cash Reserve Ratio (CRR) cut, courtesy the RBI. After sacrificing growth for months, the central bank now wants to improve the confidence levels of industry and market players given the moderation of economic growth.
The preference for a CRR cut as opposed to further open market operations (OMOs) seems to reaffirm that it is shifting its focus from inflation. By cutting CRR, the RBI injected Rs 32,000 crore liquidity into the banking system while keeping the repo and reverse repo rates unchanged.
The Nifty closed at more than a two-month high on heavy volumes, rising 1.5%. Largecaps L&T, SBI, ICICI Bank and Reliance Industries helped push the market higher. The Sensex rose 244.04 points, to close at 16,995.77 - a tad below the 17,000 mark while the Nifty moved up 81.10 points to 5,127.35 - its highest level since November 14, 2011. Analysts Review RBI's Move
Given the past track record of equity markets, which tend to discount the future in an environment of exuberance, Sanjay Sinha, the founder of Citrus Advisors feels there is probably some more steam left because equity markets tend to be impulsive. The future stance of the monetary policy would be to soften the interest rate environment, he adds.
Tushar Pradhan, the CIO of HSBC AMC agrees that in the long run, the language which came out through the RBI's statement today appears to indicate that it is going to be accommodative for growth to happen in the economy.
However, Ambareesh Baliga, COO of Way2Wealth feels the rally may not last too long.