Hello Readers / Visitors,
The government and the Reserve Bank announced the fiscal and monetary policy measures on Friday evening, There should be some reaction to the monetary policy moves, because they are a little better than expected. You can debate how long the banks will take to pass all of it down, but they will pass it down and bankers are increasingly coming around saying that they will pass down cuts in both deposit and lending rates. So, interest rates are going down, bond yields presumably falling below 5%, on Monday morning are all positive for equities, so there will be reaction particularly in some of the interest rate sensitives.
On the fiscal policy front I don’t think the stimulus package was great, there were small bits of it, which are not bad, but still there is a lot left to be desired, so the reaction will be probably more to the monetary policy package than to the fiscal bit. There was not much on the housing front or the real estate stocks front, as was expected, also there wasn’t much for the exporters, which was also largely expected. However, there was a bit about trying to route in money through NBFC’s, but, both access to capital and the willingness of infrastructure developers to take that money is a bit suspect.
On the direct expenditure from the government, precious little has been done, so Rs 30,000 crore more is thrown into IIFCL’s kitty over a period of time, the time it takes to come and the quantum of it is fairly low, so don’t think the fiscal package measures up to anything major aside of a sentimental blip up, but the monetary policy measures were good enough.
The government has announced a second fiscal stimulus package amounting to Rs 20,000 crore. Meanwhile, The RBI has cut the cash reserve ratio by 50 bps and both the repo and reverse repo rates by 100 bps. (100 bps=1%) The CRR now stands at 5%, while the repo rate post the cut stands at 5.5% from 6.5% earlier. The reverse repo rate is now at 4% from 5% earlier.
So now the most awaited STIMULAS PACK is out & what next now ?
The next could be results season & many analysts say that this season could be weaker more then expected as many job cuts heard, many industries were closed down, many have very high invesntory & no sales & so on. Also the next trigger could be fuel price cut which could lead markets higher but may come after results season to change the sentiments & close to Election months.
ALSO AFTER RESULTS SEASON PEOPLE WILL START TALKING ABOUT PRE BUDGET RALLY OR PRE ELECTION RALLY AS THIS YEAR FALLS TO BE ELECTION YEAR TOO.
Regards,
Allies Financial Services
Website : http://alliesfin.blogspot.com/
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