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Stocks from banking space will remain in focus ahead of the Reserve Bank of India's Monetary Policy, which is scheduled to be held on December 16. Market participants are expecting at least 0.25 percentage point cut in cash reserve ratio (CRR) to improve liquidity in the system. Such a move to lower CRR (the amount banks are required to keep with the RBI), will help banks to lend more. CRR has been left unchanged at 6 per cent since May 2010. Recently, China cut CRR by 50 basis points effective December 5. In the last one-year period, the BSE Bankex fell 21.89 per cent against the BSE Sensex's decline of 16.89 per cent and BSE-500's 19.11 per cent. If RBI follows China, not only banking stocks (due to higher loan offtake), the overall market will see an improvement in sentiment due to enhanced liquidity.
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