Markets may bounce back

After falling below the 12,000-level on Monday, Dalal Street is likely to witness a rally tomorrow driven by the Reserve Bank of India's move to slash the mandatory deposit requirement with the apex bank and SEBI easing norms for increasing foreign fund flows.

"The RBI's proactive move to bring in more liquidity into the almost dried up markets may help in stabilising them, which could repose faith of investors.. a rally may happen tomorrow which could stop further decline in stocks," Bonanza Portfolio President Research PK Agarwal said.

The Cash Reserve Ratio would fall to 8.5 percent from October 11 and the move would release about Rs 20,000 crore into the financial system, the RBI said in a statement. This is the first time since June 2003 that the RBI has reduced the CRR. The cut then was 25 basis points. The announcement comes three weeks ahead of a scheduled half- yearly review of the credit policy.

"Markets are likely to open on a positive note tomorrow following RBI's announcement. However, they may not sustain at higher levels, while Banks, Engineering and Infrastructure stocks will be major ones to benefit," Sharekhan Research Head Gaurav Dua said.

Announcing the measure, the apex bank has said that this is only an adhoc measure, a temporary step in view of the global financial crunch. It said liquidity management is to be a priority in the current scenario.