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Our Bureau

Mumbai, Nov. 1 The key rate cuts by the Reserve Bank of India did not come as a surprise to stockbrokers and equity analysts, as this possibility was already discounted in Friday’s trade. However, now that the rate cuts are indeed a reality, stocks are likely to look up, they said.

On Friday, the Sensex gained 8.22 per cent and the Nifty seven per cent.

Though the rate cut might have been partly discounted by the market on Friday, it will open with a positive gap on Monday, said Mr P.K. Agarwal, President-Research, Bonanza Portfolio. “The selling pressure in the market will slow down.”

However, this could be followed by selling later in the day: “The section of investors who were in the know of the rate cut bought yesterday. These people will be booking their profits on Monday. But on the whole, the market will be in the positive territory,” said Mr V.K. Sharma, Whole-Time Director and Head of Research at Anagram Securities.

The key to market movement would be the behaviour of foreign institutions who were net buyers of equity for Rs 1,237 crore on Friday.

Would that trend continue? Market-men say FIIs are covering their short positions, which was what led to the buying. “Till they cover those positions we will see them continuing to buy,” said Mr Prashant Bhansali, Director at Mehta Equities.

The move is most beneficial to the interest-sensitive scrips such as those in the banking, auto and realty sectors, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets.

Mr Bhansali pointed out that on the day of the credit policy when the RBI didn’t announce any rate cuts, the equity market had tanked. On that day, October 24, the Sensex crashed 1,070 points.

There will be some amount of base building and consolidation that will take place in the next few trading sessions, said Mr Agarwal. “We will see some smart money coming in and a good amount of value buying.”

More Stories on : Stock Markets | Foreign Institutional Investors | CRR & Bank Rates

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