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Weak global cues are likely to dampen the sentiment on Dalal Street this week despite a section of the market expecting a rate cut from the Reserve Bank of India.
Last week, the Dow Jones Industrial Average tumbled 1.8 per cent on another round of soft third-quarter results as well as Euro zone worries. The S&P-500 index dropped 1.5 per cent and the tech-focussed Nasdaq was down 0.6 per cent. The Spanish economy contracted for a fifth quarter September and unemployment rose to a record 25.02 per cent. Japan’s exports slid 10.3 per cent in September from a year earlier, leaving a trade deficit of ¥558.6 billion ($7 billion), the Finance Ministry said.
Rate cut hopes
The Reserve Bank of India is meeting on Tuesday for a quarterly review of monetary policy to decide on a rate cut. The RBI had last cut interest rates by 50 basis points in April and had said there now was no room for another cut this fiscal.
However, with the Finance Minister pitching for lower interest rates, there was an air of optimism at Dalal Street.
Morgan Stanley said: “We believe that current macro indicators – including inflation, the current account deficit, banks’ deposit growth and loan deposit ratios – do not really provide room for quick rate cuts. Moreover, drivers of inflation such as Government spending growth and rural wages also do not indicate any quick potential improvement in the inflation outlook.” It also added that early cuts would increase risks of renewed currency depreciation pressures.
According to a Royal Bank of Scotland survey, a majority of India Inc have little expectations on RBI’s second quarter monetary policy given the macro-fundamentals of the economy, with 53 per cent not foreseeing any reduction in the policy rate.
Market participants, however, expect the RBI to cut cash reserve ratio, minimum cash level that banks are required to park with RBI, to provide liquidity. As investors have already factored in the likely cut in CRR, market may not see any sharp movement even if the reduction is announced.
Results to watch
But stock-specific action will continue. This week, Bharat Heavy Electricals, Bharat Electronics, Bank of India, Colgate Palmolive and SKS Microfinance (Monday), Dr. Reddy’s Lab, Maruti Suzuki, Satyam Computer and Grasim Industries (Tuesday), Container Corporation, Power Grid Corporation, TVS Motor and Titan (Wednesday), and Wipro on Friday will be declaring their financial performance.
Bank stocks and Bank Nifty futures will also see a spurt in activity as an outcome of the monetary policy review.
>badrinarayanan.ks@thehindu.co.in
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