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RBI may finally go for a 25 bps rate cut in August if a good monsoon contains core inflation at a moderate 4-5%, as per report of Bank of America Merrill Lynch (BofAML). BofAML had expected a 25 bps rate cut in the Feb 8 policy meet considering the demonetization shock, low inflation, lower fiscal deficit and a stabilizing US dollar. The report noted that the RBI has also cut down inflation risks broadly in proportion to its own forecasts.
The RBI Sixth bimonthly monetary policy review kept its repo rate unchanged at 6.25% in the meeting held today, opting to wait for more clarity on inflation trends and on how a drastic crackdown on black money after demonetization, is impacting economic growth.
Marginal Standing Facility and Bank rate kept unchanged at 6.75%. The Fiscal 2017 GVA (Gross Value Added) seen at 6.9% and the Financial year 2018-GVA seen at 7.4% with rick evenly balanced, while Consumer Price Index (CPI) seen below 5%. Repo rate is the rate at which the central bank of a country provide loadn to commercial banks in case of any shortfall of funds.
Meantime, Sensex is trading at 28228 down by 207 points or 0.38%. Nifty is trading at 8745 down by 23.45 points or 0.27% at 3.00 pm today.
Mid-Cap & Small-cap indices have staged a sharp recovery since demonetization. The BSE Small-cap index has gained 11.8 percent, and the BSE mid-cap index has gained 11 percent since December 26, 2016. The BSE Sensex, which had hit a low of 25,807 points on December 26, has advanced 6.2 percent to 27,411 levels since then.
Between November 8 (when demonetization was triggered) and December 26, the BSE Mid-cap and Small-cap indices lost 11.5% and 11.2% respectively. However, it is expected that both Mid-Cap and small-cap stocks to remain upbeat at least till the Budget presentation.
January 13 week ended the S&P BSE Sensex adding 479 points to settle at 27238, while Nifty 50 gained 164 points to close the week at 8400. The BSE Midcap rose 2.6%, while the BSE Smallcap index surged 2%. The nifty future gained 152.85 points or 1.85% Week of Week to settle at 8,420.5, which was the third consecutive week of gains for the #Nifty.
Among gainers, Hindalco (+7.1%), Tata Steel (+6.4% ) and Indusind Bank (+6.3%), YES Bank (+5.7%), HCL Tech (+4.4%) and NTPC (+4.4%). On the macro front, CPI-based inflation fell to 3.4% in December compared to 3.6% that was in the November, while industrial production contradicted all hopes of huge adverse impact of demonetization by rising 13-month high of 5.7% in November against a contraction of 1.8% in October.