After a strong recovery on Tuesday, domestic markets are expected to open on a flat note on Wednesday. Gifty Nifty at 25,150 indicates a flat opening. All eyes will be on the RBI monetary policy outcome today. Though a status-quo is widely expected, any cut in interest rates will trigger an immediate rally in stocks, especially in rate-sensitive sectors such as banking, realty and automobiles.
The MPC will be cautious about the evolving risks to food inflation, said CareEdgte. Although core inflation has remained relatively benign, higher food inflation has kept the headline numbers elevated. As far as economic growth is concerned, while high-frequency indicators suggest some softening of economic momentum, overall growth remains healthy, it said. A revival of private consumption demand, along with early signs of a pick-up are visible. The status quo on the policy rate is expected as private investment bodes well for the overall economy. The RBI will also find comfort from the fact that growth in unsecured lending has slowed. “We believe that RBI is likely to maintain the status quo on policy interest rates in the upcoming meeting. However, if food inflation moderates, we could see a shallow 50 bps rate cut in the upcoming policy meetings in this fiscal year,” it further said.
Meanwhile, equities in the Asia-Pacific region climbed in early deals on Wednesday, after a tech rally lifted Wall Street and bets on Federal Reserve rate cuts stabilised.
Sagar Shinde, Consultant, Stoxkart - a discount broker, said: “From a derivatives perspective, option writers are maintaining significant open interest at the 25,100, 25,200, and 25,300 strike levels, which may serve as strong resistance for the index going forward. These levels, heavily laden with the anticipation of a ceiling, might become psychological barriers, triggering further selling activity as traders, influenced by loss aversion, rush to secure profits or minimise losses. Additionally, the banking index faces hurdles in the 51,700-51,900 range, where bearish sentiments, fuelled by a lingering fear and uncertainty that often pervades markets, could resurface.”