28th Jan 2012: Growth not the Inflation, new mantra for RBI

The European Union banned imports of oil from Iran on Monday and imposed a number of other economic sanctions, joining the United States in a new round of measures aimed at deflecting Tehran’s nuclear development programme. That might hurt Greece, Italy ad other ailing economies which depend heavily on Iranian crude and as a result, won as part of the EU agreement a grace period until July 1 before the embargo takes full effect.

The RBI on Tuesday slashed the Cash Reserve Ratio (CRR), the amount of deposits banks need to park with it, by half a percentage point to 5.5%, but kept other rates unchanged. Repo Rate @ 8.50% and Reverse Repo Rate @ 7.50%.

Indian markets surged 3% this week. Nifty once again managed to close above the 5200 levels and Sensex above 17000. Midcap and Small cap closed higher 3.3%. Bankex 4.3%, Metal Index 4%, IT up 4% and Auto 4%.

There is a long list of the gainers in the week. To name few, Sail, Tata Motors, Sesa goa, Rel Infra, Maruti all gained in the range of 10-15%. Bharti Airtel, Maruti, Idfc, Lnt, Mnm, Rcom, Rpower, Ril, Hero Motocorp, Ranbaxy all gained in the range of 5-10%. In the midcap stocks Ptc Financial closed with a weekly gain of 49%, Zensar Tech 27% & Indosolar 28%. The losers in the list are Midvalley Ent 30%, Kgn Intl 23% and Neha Intl 10%.

Volumes have been good in the markets with price appreciation. Markets have been trending up since a long time. Next weeks rally have been in continuation. Nifty and Sensex closed higher by 3%. Technically speaking Nifty has bounce back from its low to close near the trendline. (See in the chart No. 1.) the trendline is made on the basis of the highs which were made since Oct 2010. Nifty have closed just below the trendline. The Redline trendline (no.2) is made joining the lows which since June 2010. Nifty have closed below this also. RSI is in the over bought zone that calls for some caution in the market. MACD is still in the positive mode, but anytime the divergence can change. Nifty if stabilizes above 5200 then we could see higher levels also. Close above 5225 may take the Nifty to 5325-5400 levels, but the same will not be so easy as the Nifty is in the overbought position, so before the next rally we might see some correction.

Rupee too was in the hands of the bulls. After the intervention by the RBI, Rupee has bounced back to 49.30 levels. Commodities like Gold and Silver have also recovered some points.

FII continued with its buying speer. And DII on the other hand continued to be buyer in the Indian equity market.