Market To Open Flat Ahead of RBI Meet

In last two trading sessions markets have shown volatility as it is speculating action of RBI of rate cut front. We expect markets to open flat ahead of the RBI monetary policy review due by 11 AM today. The global cues are mixed but are less important due to the domestic event. SGX Nifty is currently trading 1.5 points down to 5701. 

Yesterday RBI revised the GDP forecast to 5.7% from 6.5%. On the reforms front it said that the reforms are in right direction but further measures are required for their swift implementation. RBI in the past has said that it is the inflation that is damaging the economy. Until inflation is tamed, RBI may not cut the interest rates. 

While there is strong opinion on the street that the bank will not cut the key policy rate, some analysts and experts are of opinion that RBI may go ahead with a CRR cut to boost the liquidity. The RBI has so far reduced 150 basis points cash reserve ratio (CRR) and 50 bps repo rate in the year. 

Yesterday Finance Minister P Chidambaram said at a news conference that he would nearly halve the deficit in just over four years. After the remarks of FM, some analysts are now expecting a bold move by RBI today on the rate cut front. 

Earlier on Monday, Indian markets remained volatile in trades. In the morning markets were showing some gains but after the news that the RBI has revised the GDP forecast to 5.7% from 6.5%, markets turned volatile. On the speculation of the rate cut however markets remained flat by closing. 

The US markets were closed on Monday due to weather for the first time in 27 years. The markets may also remain closed today due to the weather worries. 

The European markets yesterday closed negative as investors struggled to find a direction after Wall Street was closed. FTSE declined by 0.2% while Dax was down 0.4%. CAC tanked more than 0.7% by closing. 

The Asian markets at the moment are subdued as powerful Hurricane activity curtailed the activity in US stock markets. Japan's Nikkei is trading up 0.38% ahead of a widely expected policy easing by the Bank of Japan. Hang Seng is little unchanged while Shanghai is up 0.18%. 

The key of the today’s market is with the RBI there fore we expect a volatile session today. A rate cut of any quantum will be seen positively by the market.