In its last meet for the year, the Reserve Bank of India surprised economists and market experts alike as it kept the repo rate unchanged at 6.25 percent, as opposed to expectations of an imminent rate cut.
Right after the announcement Bank Nifty nosedived around 1.9 percent and NIfty PSU Bank index was down 2.6 percent from their respective intraday high.
The consensus of the market was of a 25 basis point (bps) rate cut, which did not happen and led to this correction, says Vikas Khemani, President and CEO, Edelweiss Securities.
Post the monetary meet, Khemani told CNBC-TV18 that the central banks decision is not earth shattering and the market has already factored tepid growth in earnings this year.
He said that knee jerk reaction in today's trading session will not lead to a major sell-off.
The market will now look forward to how corporate earnings fare in the remaining fiscal and business should be usual from tomorrow onwards, he said.Market Expert Ashwani Gujral said that this fall in the market is an opportunity to buy in to the market with a multi day perspective.
He said that if on the back of bad news key levels are not broken then the market tends to reverse fairly quickly.Below is the interview transcript. Anuj: Your first thoughts on what transpired in last 15 to 20 minutes market was not positioned for this, the market was positioned for a rate cut at least 25 some even hoping for 50? No rate cut what is your thought on that? Khemani: I think consensus were obviously 25 basis point and that is the reason we have seen markets have kind of in some sense sold off. So, we have seen some correction taking place but I guess now it is not something very chaotic for the market. We have had significant correction already taking place in the market backed by couple of demonetisation related issues. So, this is an event which would be behind. Tomorrow onwards, I think currently markets are basically looking for various reasons of sort of growth and in my opinion that downward revision in sort of growth expectation is somewhat negative. However, in some sense I do believe that markets already kind of factoring in or planning this year of slow growth in the earning. So, I think now more and more sort of hopes will start building, more towards we have to see what happens on Fed rate and market will look forward to next events and I don’t think this will be a major sell off kind of event from here on. Latha: As an equity investor Central Bank doesn’t see a very big cut in growth just about half a percentage point. They think the impact is transitory. Most important no help for fiscal stimulus from the Reserve Bank very unequivocally stated, no liability reduction, your thoughts from an equity investor point of view? Khemani: Definitely, equity markets have been kind of factoring in slower growth and expected already, so that said and there is no kneejerk reaction to whatever RBI has said. I think this policy will be, tomorrow onwards market as usual. This fiscal benefit markets were expecting and so there is some clarity out here. However, I don’t think that will be a significant negative form of a market at this point in time. Yes, markets were looking for that will government get this extra money to undertake some sort of additional expense on some particular segment of either bank recapitalisation or infrastructure. So, I think those goes away but this clarity helps and now markets will look forward for how the corporate earnings come about and what are the international events ahead of us. So, I would assume that tomorrow onwards market will be as usual, back to normal. I don’t see a significant disappointment either from this policy stand point of it. It is a very credible policy and setting the tone right.
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