Market View : Rate Cut Brings Cheers To Market

Further, the RBI’s rate cut decision can be treated as beginning of big rate cut cycle. Most of the analysts on Dalal Street expect almost 100 basis points rate cut over next one year. FIIs cheered this surprise move and poured almost Rs 6200 crore equity in Indian equity market in last four trading session after rate cut. Both the government and the RBI are pro-actively taking steps to take domestic economy to a higher growth orbit which is giving significant confidence to FIIs.

The surprise rate cut by the reserve bank definitely boosted the investor sentiments and rejuvenated interest in the Indian equity market. This was a big respite for market participants specially for the rate sensitive companies and will create big enthusiasm in present sluggish business environment in days to come. The manufacturing sector too sees renewed capital expenditure cycle because of interest rate cut to lower the cost of capital for the industry. The domestic real estate industry which creates considerable job creation will benefit from the RBI's decision to cut key interest rate due to improvement in housing demand and sentiments in the sluggish property market.

There are few global concerns which may create volatility in the domestic markets. The Chinese economy posted 7.3 per cent yearly GPD growth for the fourth quarter of 2014 which was slowest pace in last 24 years. Further, the Chinese currency is showing considerable strengthening against US dollar making the economy less competitive for its exports. On European market front, there is monitory policy event on January 22 when ECB is expected to decide its quantitative easing program. This is expected to create considerable volatility in the domestic market too. However the volatility is just an opportunity to accumulate equities. Interestingly, during last couple of weeks, the European markets showed good up move with DAX and CAC 40 gaining 8.3 and 8.9 per cent respectively.

On domestic front, the market showed considerable appreciation on FIIs buying after rate cut. The market barometers, SENSEX and Nifty surged by 7.05 and 7.41 per cent respectively during last fortnight. The market rally was lead by rate sensitive – Reality, Banking and Auto sector which surged 8.03, 7.60 and 6.04 per cent respectively during the same period. Apart from the rate sensitive sectors, India IT sectors appreciated by 7.71 per cent on good December 2015 quarter results. Expectation of announcement of some key strategic tie-ups during the US President visit, has also created good amount of positive sentiments. Further, we can expect some consolidation on the wake of corporate earnings season in next one month. However, the market mood is expected to continue on positive side.