Markets surge on China rate cuts : Indian Market rallies on interest rate cut hopes.

Will RBI follow China ways? Will they cut interest rate soon? Even if they cut 100bps, do you think banks will start lending or retail/corporate will start talking loans? No Way!!! Because we are living in credit crunch era now and don't expect further spending from anyone soon. It takes time for people to come back to normal, stead state with spending habits. So, any cheer by market for rate cut will be short lived.

Indian market took a sharp re-bound just after China rate cut news which was something very unexpected. In general european markets were trading weak hence India should have fallen as we predicted but we turned out to be wrong!!!

• Beijing is trying to shore up consumer and investor confidence and reverse a sharp downturn in growth. China's economy is expected to expand by at least 9 percent this year, down from 11.9 percent last year. But communist leaders worry about rising job losses -- especially in export industries hit by weak global demand -- and possible unrest.
• China has avoided a big hit so far from the global financial crisis because its banks are healthy and exports strong. But conditions are expected to worsen in coming months as export demand weakens and growth in real estate and other domestic industries slows.
• Just this week, the World Bank cut its forecast for China's growth next year from 9.2 percent to 7.5 percent, the lowest level since 1990.
• Key benchmark indices surged to day's high boosted by optimism that more central bank's will resort to rate cuts after a surprise rate cut by China. Also probable short covering ahead of the derivatives expiry on Thursday, propelled the market further, thereby ignoring subdued European indices.
• The market was volatile caught between concerns about the weakening domestic and US economy and firmer Asian stocks on the back of the latest US Federal Reserve measures to boost the flagging US financial system.
• Sentiments improved after China cut CRR by 100 basis points to 16 per cent and lending rates to 5.58 per cent from 6.66 per cent, as it revived hopes of a similar move by the Reserve Bank of India. Market also found comfort from expectations of domestic inflation falling to a seven-month low of 8.56 per cent in the week to Nov 15 against 8.9 per cent earlier.

- Abhishek Sonu, Associate, HBJ Capital