The market closed for the week on a weak note. The Sensex and Nifty closed at 24,673.84 and 7,555.20 respectively. The indices lost around 2% for the week. The major event of the week was the monetary policy announcement of the RBI. The apex bank acted on expected lines by cutting the repo rate by 25 bps, but surprised the market by compressing the interest rate corridor (the difference between reverse repo, repo and marginal standing facility) by 50 bps and initiating measures to ease liquidity in the system. With this latest cut in repo rate, RBI has cut the key lending rate by 150 bps through five rate cuts since the accommodative stance began in January 2015.
This accommodative monetary stance and the switch over to the MCLR (Marginal Cost of funds based Lending Rate) would certainly bring down the interest rate and provide the much-needed monetary stimulus to the economy. Earlier, the government had prepared the ground for the rate reduction by cutting interest rates on small savings and observing fiscal discipline in the budget.
The ‘risk on’ in emerging markets that lifted most emerging markets like India in March has suffered a setback early April. Going forward, the market is likely to respond to corporate earnings. The market is likely to reward good performers and punish poor performers. Private sector banks with retail lending focus, consumer NBFCs, IT, cement, major oil refiners and automobiles are likely to report good results.