*RBI policy tomorrow.*
*What's view on for that?*
There are 2-3 important factors which we need to see.
1. Hawkish stance was seen by FED. As per recent FED policy : higher rates could remain for higher period. Last 8-10 days fall in Indian or US market was for that reason only. Due to which we even saw 10Y US bond yields started moving higher since then. So tomorrow even RBI governor may sound Hawkish little and after FED policy it has been clear that we won't go for rate cut.
2. Rate hike or Rate Cut...?
Rate cut is not possible as discussed above. Ideally rate hike shoudln't be done. Rate hike at this point may impact spending power of retailers. We are just about to start with Festive season so any hike of 25/35 bps might be taken negatively. Somewhere or the other market is aware that there are thin chances of rate hike and has factored upto certain level in recent fall.
3. CRR Liquidity
If you remember then in last RBI policy, Incremental CRR was introduced. Due to deposits of 2000 Rs notes, banks had higher liquidity. That's gonna complete on 8th oct. Hope no further strong new policy to tighten liquidity is bought into, else again Financial sector may crack.
Action Reaction tomorrow:
Case 1: Rate hike by 25/35 bps with hawkish commentary. It may knock down market by 0.7/1% specially banking sector. Chances of rate hike are just 5/10%
Case 2: Maintain Status Quo with hawkish commentary. In this case market may go for good short covering, market may appriciate and consider NO Negative and Positive in such conditions.
Case 3: Rate cut. If this happens by any chances then expect more then 1.5/2% upward rally in All Index. Possible BNF could rally 2.5/3% also. Chances of this is almost neglible. Already US bonds and Indian bond yields are narrowing gap. This impacts Importers and Exporters.
By: via Telegram.me/AlliesFin #StockMarket #india
