Todays Stock Market Summary Chart Of Friday February 7, 2017
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Will India grow at 7%? The
government and the RBI still think so. I
think the 'official' GDP forecasts must be taken with a pinch of salt. The fact
is that government does not know how much of an impact demonetisation had on
the economy. Yet the official estimate of GDP growth is 7.1% for FY17.
Today's Loss for - SUN pharma ( 680-668-669)
The RBI's two-day monetary
policy meeting is under way. Expectations are that the RBI will officially
lower its growth estimate. This wouldn't surprise or worry us.
We would be more interested in
what the RBI will do tomorrow on the policy front now that it has the data from
the demonetization exercise.
Remember that banks did cut rates when they received a flood of demonetised notes. They are highly unlikely to cut rates without a repo rate cut from the RBI. Stay tuned for our analysis on the policy tomorrow.
Chart of the Day
Speaking of the monetary policy,
everyone and their uncle seem to be expecting a rate cut tomorrow. But no one
seems to in agreement about the amount.
The repo rate (i.e. the rate at
which the RBI lends to banks) stands at 6.25%. This level is quite reasonable
we believe.
However, corporate India does
not think so. As always before any RBI policy meeting, they have started
clamoring for a rate cut. We even read a suggestion for a 0.75% reduction!
As today's chart shows, the repo
rate has fluctuated in a range over the last six years. It is back to where it
was in November 2010. The last change was a cut to 6.25% last October.
Repo Rate is Trending Down
So where to from here? It is
entirely possible the RBI could reduce the rate a bit more. However, it cannot
lose focus on inflation. With commodity prices showing signs of moving higher,
the central bank will have to walk a fine balancing act without giving in to the
whims of corporate India.
After opening the day flat, the Indian share markets traded on a
negative note. Sectoral indices are also trading on a negative note with stocks
in the metal sector witnessing maximum selling pressure.
The BSE Sensex is trading down
134 points (down 0.5%) and the NSE Nifty is trading down 38 points (down 0.4%).
The BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is
trading down by around 0.2%.
Today's Investing Mantra
"Everyone has the brainpower
to follow the stock market. If you made it through fifth-grade math, you can do
it" - Peter Lynch