All Eyes on RBI

The street isn’t expecting much from the RBI on the interest rate front today. Yet, all eyes will be on what the central banker does in its monetary policy review. Unless the RBI springs a surprise by cutting interest rates (which it is not likely to do), it will be cues emerging from the mid-year economic review (read our special report on the mid-year economic review on www.dsij.in), that will largely drive the markets.

Mixed signals have emerged from the economic review. FY13 according to most will remain fairly subdued and growth estimates have been scaled down for this year to almost a decade low level. This is likely to weigh on the markets. However, being cautiously optimistic Chief Economic Advisor, Raghuram Rajan, has reportedly voiced expectations of a growth above 6 per cent in FY14.

Asian markets have opened up and are trading fairly positive today, taking cues from the overnight performance of the US markets. A renewed expectation of a deal between law makers to avert taking the US economy over the ‘Fiscal Cliff’ saw the Dow end the day up 100 points. According to reports, the latest counterproposal from White House includes USD 1.2 trillion in revenue increases and USD 1.22 trillion in spending reduction. All is still on the negotiating table and this whole drama about the ‘Fiscal Cliff’ will probably run through the next few days until something concrete really does happen. For now, markets are likely ride on the wave of optimism that has gripped them following talks a deal being struck which sounds good enough.

The SGX Nifty is trading up 13 points, hinting towards a positive open for the Indian markets today. We don’t see the markets swinging wildly, but certain sectors definitely will be watched closely. Banking is one of them. The government has approved the pumping in of Rs 12000 crore in public sector banking companies which could keep this sector in the limelight today. Of this reportedly Rs 3400 crore will go into SBI. Power too will be in focus with the PMO upping its ante on the signing of the FSAs. But what will more keenly be watched is the IT sector. TCS the largest player in the sector, is reported to have toned down its expectations for the current quarter. It is probably looking at weakness in business and lower margins. Though the company is reported to have pinned this on ‘fewer number of working days in this quarter’, there could probably be much to read between the lines. Watch out for quality mid and small caps as this space has been flying high over the past couple of days.

Overall, a day full of anxiety awaits the markets. On a sure note, there isn’t much of a negative bias to trading today. The RBIs actions of not cutting interest rates are already priced in and hence any positive surprise on that front will only take the markets higher. Other global markets trading in the positive adds that extra bit of optimism to your trading day today.