Finally we have a 50bps of CRR cut and a dovish policy stance from the guv and this paves way for the much needed rate cuts in the oncoming policy review in early March 2012. The market seems to have provided a thumbs up to the announcement since it was on expected lines and now a rate cut in the next six months with a meaningfully slower economic activity in the next quarter making a case for a fast and swift cut in lending rate a possibility.
The notable runner for the day were the banking and beta sectors running like sprinters in a marathon match. Though there is good news, the positive effects would be long term in nature and nothing to running like being chased by a lion. But stock markets offer extremes and like extreme sports, is not really for the faint hearted. So we have excellent performances for the month of January 2012 from even the bigges such as SBI, L&T and IDFC all of whom have delivered 25% returns since the start of the year. Now to put things in perspective these stock were down 50% for the entire 2011 and the recovery is incomplete unless they double from their lowest levels; which is still far away. Nevertheless some consolation.
With expiry in the F&O segment tomorrow, expect some volatility and this being a short week, we could have more volatility on Friday too.
All in all, looks like we clocked close to 12% MTD (month-to-date) this month and by the looks of it, we could be closing very strongly by the end of this month. With January 2012 starting on such as positive note, it is likely that the entire 2012 could well close in the positive for equities; though very early to predict, the possibility of a firm positive close is very high.
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