With budget week behind, markets look to RBI for out-of-turn rate cut

MUMBAI: All eyes are on the Reserve Bank of India (RBI), which is scheduled for a monetary policy review on April 5, but is widely expected to cut rates out-ofturn after the government said it will stick to the fiscal deficit target of 3.5% for 2016-17.

The markets will also closely look for cues from the meeting of the European Central Bank, as it could increase the size or the duration of its bond-buying programme in the wake of continued economic uncertainties.

India’s equity markets saw a sharp rebound last week with the benchmark Sensex logging its best-weekly gain in absolute terms in almost seven years as foreign institutional investors, buoyed by the government’s focus on fiscal prudence in the budget, picked up heavily beaten-down bluechips.

“With no major cues in the domestic markets, all eyes are now on RBI governor Raghuram Rajan. The necessary condition for a rate cut has been met, and this is increasing expectations of an inter-meeting rate cut,” said Vijay Singhania, founder of discount brokerage Trade Smart Online.

In the holiday-shortened week, focus will also shift to key reforms such as Goods and Services Tax, which are stuck in Parliament. Markets will be closed on Monday on account of Mahashivratri.

“The big event is behind us, and what lies ahead is hope that GST will get passed sooner, and that the RBI may lower rates,” according to brokerage India Infoline.

The government will release the industrial production figures for January on Friday.

Giving a thumbs up to the budget, FIIS invested ₹3,500 crore in stocks last week, which drove the Sensex up 6.50%, or 1,500 points.