Good Budget And Rate Cut To Drive The Market

The reserve bank in its statement said, “The guidance on policy action given in the fifth-bi-monthly monetary policy statement of December 2014 is largely unchanged. Further monetary actions will be conditioned by incoming data, especially on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates, the monsoon outturn and developments in the international environment.”

The RBI’s rate cut was complementary to the government’s fiscal consolidation announced earlier in the Union Budget. The RBI took the rate cut decision due to higher than expected reduction in the inflationary pressure, low capacity utilsation of industry, low off-take of credit and lower crude oil prices. Further, the government has recently announced a constructive union budget and the market participants are enthusiastic about the government’s aim to boost investments by spending without causing a dent on its finances. The finance minister has adopted pragmatic approach of the government to balance growth and fiscal deficit according to market experts. Further, the policy rate cut by the reserve bank along with the other key reforms will definitely drive the market further at higher level in days ahead.

Further on the global front too, the European markets showed good amount of appreciation with the German DAX and French CAC 40 gaining by 3.5 and 2.4 per cent in last couple of weeks. The US market too showed good amount of traction and Dow Jones index surged by almost one percent during the same period. The Japanese market i.e. Nikkei 225 index showed a growth of 2.8 per cent in last couple of week. However, the global markets are trading at its record highs and seen some profit booking after every up movements and creating some volatility across all global markets. We, at Dalal Street Investment Journal, once again reiterate that the volatile trading patterns can be used to accumulate the equity rather than timing the markets.