Indian equities are seen extending last week’s losses, as fear of more bad news from the US financial sector is likely to keep the mood in world markets subdued. Leading US equity benchmark Dow Jones Industrial Average fell to a six-year low on Friday on concerns that many US banks would be nationalised.
Such a move, while saving those banks from any collapse, would erode the shareholder value, according to analysts. Such concerns were eased partly after the White House spoke in favour of US banks remaining in private hands.
Back home, the market is likely to be volatile in the first two trading sessions of the week, in the run-up to the expiry of the February derivative series on Thursday, as traders square off existing positions and take up fresh ones in the March series.
Fund managers believe possible interest rate cuts by the Reserve Bank of India, this week, could revive sentiment, albeit temporarily. "This time, unlike previously, the market is yet to factor in expectations of a rate cut, which is a consoling factor,” said a fund manager with a private mutual fund.
"Some aggressive short-covering may happen if RBI cuts rates aggressively, and its short-term impact will be huge, given the quantum of shorts present now,” he added.
Expectations of aggressive rate cuts by the central bank have strengthened, as government’s inability to dole out liberal fiscal relief measures due to deteriorating financial position, has put the onus on RBI to anchor the economy through the current economic crisis.
“Given the upcoming elections, the entire onus on stimulating growth now rests on the monetary policy, and we expect additional easing to the tune of 100-150 basis points (bps),” said Citigroup economists in a report.
“While rising Consumer Price Index (CPI) is a worry, we expect a minimum 100-150-bps cut in repo/reverse repo rates and cash reserve ratio (CRR) in the near term,” they added.
Last week, benchmark indices lost 7-8%, with the Nifty ending at 2,736.45 on Friday amid sustained selling by foreign institutional investors (FIIs) after the government said its fiscal deficit would widen to 5.5% in 2009-10.
An independent technical analyst said the Nifty has a crucial support at 2,600, breaking which the index could head below 2,500 levels. He advises even short-term traders to keep their directional bets to the minimum at the moment, given the uncertain market outlook.
Such a move, while saving those banks from any collapse, would erode the shareholder value, according to analysts. Such concerns were eased partly after the White House spoke in favour of US banks remaining in private hands.
Back home, the market is likely to be volatile in the first two trading sessions of the week, in the run-up to the expiry of the February derivative series on Thursday, as traders square off existing positions and take up fresh ones in the March series.
Fund managers believe possible interest rate cuts by the Reserve Bank of India, this week, could revive sentiment, albeit temporarily. "This time, unlike previously, the market is yet to factor in expectations of a rate cut, which is a consoling factor,” said a fund manager with a private mutual fund.
"Some aggressive short-covering may happen if RBI cuts rates aggressively, and its short-term impact will be huge, given the quantum of shorts present now,” he added.
Expectations of aggressive rate cuts by the central bank have strengthened, as government’s inability to dole out liberal fiscal relief measures due to deteriorating financial position, has put the onus on RBI to anchor the economy through the current economic crisis.
“Given the upcoming elections, the entire onus on stimulating growth now rests on the monetary policy, and we expect additional easing to the tune of 100-150 basis points (bps),” said Citigroup economists in a report.
“While rising Consumer Price Index (CPI) is a worry, we expect a minimum 100-150-bps cut in repo/reverse repo rates and cash reserve ratio (CRR) in the near term,” they added.
Last week, benchmark indices lost 7-8%, with the Nifty ending at 2,736.45 on Friday amid sustained selling by foreign institutional investors (FIIs) after the government said its fiscal deficit would widen to 5.5% in 2009-10.
An independent technical analyst said the Nifty has a crucial support at 2,600, breaking which the index could head below 2,500 levels. He advises even short-term traders to keep their directional bets to the minimum at the moment, given the uncertain market outlook.
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