Volatility continued in the Indian equity markets in the month of April too and looks like the markets are now breaking its narrow range of trading, post the RBI’s Monetary Policy announcements on 3rd May, 2011. The RBI raised its repo and reverse repo rates by 50 basis points mainly aiming at controlling the mounting inflationary pressures, although the street expected a 25 bps hike. RBI also announced increase in the savings bank rate to 4% from 3.5%, while keeping the Cash Reserve Ratio (CRR) unchanged at 6%. RBI lowered the economic growth projection to 8% for the current fiscal. Rising inflation and not too encouraging Industrial production numbers coupled with tighter monetary stance by RBI were by and large responsible for the plunge of close to 3% on 3rd May. In a choice between taming inflation and growth, RBI has rightly gone for the former, which in turn should keep the long term growth prospect intact.
Corporate results for the quarter ending March 2011 were a mixed bag – and broadly in line with the market expectations. However the margins would continue to be under pressure on account of rising wage bill, interest cost and raw material prices. The BSE Sensex and S&P Nifty ended nearly flat for the month, with loss of 1.59% and 1.44% respectively. Among the sectors which did well were BSE Healthcare and BSE FMCG – both of them gave handsome returns of 3.47% and 4.42% respectively for the month. BSE IT and BSE Realty were the worst hit sectors for the month.
News on the progress of monsoon in India is again going to be crucial for the markets, given the scenario of already high commodity prices prevailing in the country.
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