Money Outlook…

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Equity markets have been consolidating in the narrow range closing the weak with a minor correction of 0.6%- first time in last 7 weeks. However broader market remained in limelight with midcap and smallcap index reporting gains of 2.2% and 1.8% respectively. Technology sector saw a correction of 2.7%. Crude oil continued to be in downtrend loosing 1.3% for the week and 37.5% YTD, which is big relief for govt from fiscal and inflation perspective.

Govt is taking step in the right direction to boost its revenue by sharing benefits of fall in crude oil prices with consumer, wherein partial benefits are passed on in the form of fuel price cut and rest is retained in the form of excise duty hike.

RBI kept status quo on all the key rates – repo, reverse repo, CRR & SLR – inline with street expectations. However, the policy stated that if the current inflation momentum and changes in inflationary expectations continue and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle. In his media briefing, Governor Rajan suggested that once there is a change in policy stance then it shall persist and it does not want to flip flop the interest rate direction. RBI still finds some uncertainty about the durability of persistent low inflation and wants to confirm the low inflation trend for the longer period.

Govt seems to be committed to revive the economic growth and is taking suitable steps – coal auction plan, gas pooling mechanism, telecom spectrum auction, clearing various deals related to defence, FDI etc. Going forward, we believe the intermediate uptrend in the market rally is intact. Correction if any is likely to be short lived and healthy for the market. Market remains stock pickers paradise.

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