Wednesday, January 25, 2012

Finally CRR cut.............

Has the market made the botton?Will it not go below 4500 again?
I was constantly reading what Fin Min was speaking, what Monteksingh was saying ,what is coming out from RBI office.
The D day came and we got a CRR cut of .5 basis.I read that RBI will now think on growth in  recent past and I was not surprised to see a CRR cur at 0.5 basis.
Th repo rate has remained unchanged.That needs to get cut as well.Ofcourse, CRR cut will increase the liquidity and banks will have more money to land, to be precise Rs 32,000 cr, and that will help Infra and Auto sector and ofcourse Banking sector.
That means that banks will have Rs 32,000 cr more to lend which will go in Infra and Auto.
This week was important in the sense that the general policy was going to be declared by RBI.This week was also important because market heavy weight like Ril Ind, players call it the King, result was also going to be declared.
Ril result was not upto market expectation and RBI's CRR cut was not enough for market to applaude it.
But still market went up on Tuesday, ignoring Ril bad results and chreeing RBI CRR cut in anticipation that RBI will take further steps in future to stimulate the growth of the economy.
It is still a long way to go.There will be many ups and down in our market before it makes a clear indication that bear market is over.
Retial participation is almost negligible .I am seeing very low  Vols in trade in market.5 shares or 50 shares or 500-600 shares in counter like Jubilant Ind , India Glycols etc are very low which shows disinterest of retail participation.
And that is why I feel , it will take time for the market to move up.The consolidation phase is still not over.
When market is finding its bottom, how one can think of consolidation taking place?
Let first market make sure the bottom is made.Then let it consolidate and then let Volumn goes up and then think of any good upside.
I was reading Sudarshan Sukhani who says that once 5400 is crossed , market can touch 6400 in no time.
He may prove right and he may prove wrong.One never knows what market will do.
Let us see what is there in store for us.
But I am getting a solace when I read this sentence of RBI Governor Mr Subbarao:

"He said “the CRR is the most effective instrument for permanent liquidity injections over a sustained period of time. The reduction can also be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them.”"

Here he clrealy suggests that future rate cut will be lowering rate hike has reached the saturation point , which I have written here couple of time,and now only way is rate cut.
Rate hike has reached the peak and there will be no futher hike in rate.That is also a positive for market .

1 comment:

  1. Finally subbarao succumbed to govt pressure or say frustrated by govt inaction. Govt and media cunningly projected the interest rates as the culprit for slowing economy whereas the economy is sinking because of inaction on reforms front. Market may cheer this CRR cut for some time but will again go into dark.