Bears might return to the market after taking a pause yesterday, as investors take the exit path following big gains for the past one year.Expect the benchmark index or the Sensex to lose nearly a percent for the day. Midcaps and Smallcap stocks might feel the heat
Real Estate and Metal stocks might feel the pain for another day. Auto majors might also feel the heat as there might be selling in Tata Motors, Mahindra and Maruti.The much awaited meeting of the RBI will be held today. There may be a heated debate whether to start raising interest rates today and there is a strong chance that the banks to set aside more cash to temper inflation.The Reserve Bank of India may raise the cash reserve ratio to 5.5 percent from 5 percent, the first increase since 2008.
We are of the opinion that Mr.Subbarao will keep the rates unchanged but will take action on the CRR front. Overall, a bad news for the bank is in the offing, much of which is baked in to the prices of bank stocks. We might see some selling in Autos ans some Banks following the news. Please avoid going short in these markets as everyone in the Street is expecting a fall. Moreover, Indian markets have not participated in the up move we have seen in the Asian peers yesterday, so the magnitude of the fall might be limited.