Duvvuri Takes Centr(at)e-Stage

Today is the day that will decide the fate of the countless polls, opinions and words that expressed hopes of a rate cut by 25 basis points (and 50 basis points by some who have been overly optimistic). The RBI monetary policy review stands today when RBI Governor Duvvuri Subbarao will consider his action. After much tightrope walking yesterday, the markets are expected to see some hefty movement today.

Over the last few weeks, Subbarao has been rather blunt about his opinions, almost reminding markets of ground realities. Although inflation levels have been easing, they haven’t come down to a level that can be safely considered to be the comfort zone. The macroeconomic risk of the twin deficit India carries has also been rather sticky. The cautious RBI revised India’s GDP forecast to 5.5% in 2012-13 as against the earlier 5.7%. It also said that it anticipates a slow recovery in 2013-14 with inflation remaining sticky.

These fresh set of words, which have been no different from RBI’s carriage in the last few weeks, got markets jittery on the eve of the big day. Trading remained edgy all day yesterday with the markets hovering around Friday’s closing. The day finally ended with the Sensex losing 0.18 points and the Nifty gaining 0.15 points. Owing to domestic uncertainty over the monetary policy decision, have no doubt in expecting edgy trading today.

Internationally, markets have been positive due to upbeat data from the US. Durable goods orders climbed 4.6% in December 2012, beating expectations. This had resulted in positive sentiment across the US and Europe. However, it’s going to be ignored on Indian bourses considering the attention RBI decisions get.

Macroeconomic data will definitely take centre-stage today but the sides would be filled by corporate results for Q3FY13. Among the major companies to announce their results today are Binani Industries, Blue Dart Express, Century Textiles & Industries, Crompton Greaves, L&T Finance Holdings, Oracle Financial Services Software, Pidilite Industries, Shoppers Stop, Sterlite Industries and Torrent Pharmaceuticals.

All said and done, clearly, the rate cut decision will keep markets edgy and nervous till the announcement happens. The course of the market will be decided by the decision taken. A cut can result in a heavy upside while a status quo would result in a downfall.