Religare believes that there is room for another 25 basis points rate cut, the RBI is likely to rather wait until at least August for further developments on monsoon
While the Reserve Bank of India’s credit policy failed to enthuse the stock market, experts believe the long-term impact of the easing of rates and providing larger liquidity will be positive for the market.
“The liquidity easing would play out over a longer term for the equity market,” Arun Gopalan, vice-president research, Systematix Shares and Stocks, said.
Equity benchmark indices shed over 500 points on April 5 despite the 25 basis points repo rate cut announced by Reserve Bank of India.
G Chokkalingam, managing director, Equinomics Research, said, “I believe Sensex can hit 30,000 again by the end of December 2016.”
In the past one month upto April 4, the BSE Sensex surged 10.42 per cent to 25,399.65 on April 4 from 23,002 on February 29. Rate sensitives BSE Auto, BSE Bankex and BSE Realty surged 14.13 per cent, 16.66 per cent and 19.60, respectively, during the same period.
Along with a 25 basis points repo rate cut, RBI introduced a host of measures to smoothen liquidity supply so that banks can lend to the productive sectors and indicated accommodative stance going ahead.
According to market experts, the monetary policy has been largely in-line with expectations as far as the 25 basis point cut in the repo rate is concerned. The interest rate corridor has been narrowed, with the gap between the repo and reverse repo reduced from 100 bps to 50 bps. Governor Raghuram Rajan also announced open market operations of Rs 15,000 crore from today.
Mustafa Nadeem, chief executive officer, Epic Research, said, “We believe stock market has already discounted the 25 basis point rate cut and in near term 7,950-7,970 is a strong supply zone which will act as resistance along with 50 per cent retracement of 9,119 to 6,826 comes at 7,985.”
Post rate cut, Religare believes that there is room for another 25 basis points rate cut, the RBI is likely to rather wait until at least August for further developments on monsoon, 7th Central Pay Commission implementation, core inflation and transmission before cutting rates further.