The stock market regulator’s move to ease some curbs on indirect investments by foreign portfolio investors (Sebi revises P-notes norms, scraps ODI restrictions) is expected to lift the sentiment when the market opens for trading tomorrow. But this optimism will be short lived.
The Reserve Bank of India, or RBI, has cut the cash reserve ratio, or CRR, by 50 bps to 8.5% with effect October 11. The cut will infuse Rs 20,000 crore into the system. CRR is the portion of funds that banks have to park with the central bank. The CRR cut is ad hoc and temporary in nature. Liquidity management will be priority amid global uncertainty. The major priority of policy will be to anchor inflation expectations.
What shall we do now?
On Tuesday in case if market bounce back, it will not be able to sustained gains and will lose out before close. So one must SHORT or buy PUT option after the bounce. Bearishness in the market will continue and it will be difficult to change the sentiments with CRR cut or P-Notes waivers.
Continue to hold SHORT position on Nifty or PUT Option on Nifty. Our research team came with conclusion that Indian market might not see any major pull back tomorrow, in case if there is bounce it will be at most 2-3% that too for a day and all gains will be lost by market close.
Even if you provide something free to FII folks, they are not going to come back and invest now, hedge funds are expected to withdraw a huge sum of money from global market especially Asian. At home, we all MF/HNI/Public all have lots of money in hand but no one will invest now because human behavior says that people expects and look for bottom to buy and top to sell which is close to impossible.
-HBJ Capital Team
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