RBI - Sound action or loud words?

Inflation really is always and everywhere a monetary phenomenon. - Milton Friedman.

That the RBI will resume monetary tightening after December’s pause is a no-brainer. Markets too have somewhat discounted a rate hike. But, there might still be an element of surprise that could hit the sentiment temporarily. Some are calling for an aggressive 50 bps hike to tame inflation. Whether D. Subbarao obliges or not we will know in a few hours.



The RBI is also likely to unveil fresh steps to tackle the tight liquidity situation. How the markets will react hinges on what the RBI finally chooses to do and what the central bank Governor says. The start will be positive on the back of strong global cues. Volatility may inch up ahead of Thursday’s F&O expiry. Indian markets will be shut on Wednesday on account of the Republic Day.

The two-day FOMC meet begins today while President Obama will deliver his state of the union address.

Dr. Reddy’s, Grasim, HUL, Sterlite Industries and UltraTech Cement are among the few top companies announcing their results today. Meanwhile, IOC and HPCL have deferred their results as they have not received compensation from the Government. Banks have rebounded lately on the back of strong earnings. They will remain in the spotlight due to the RBI’s quarterly review of monetary policy.

Globally, things have not been anywhere near as bad as they have been in India. The US markets particularly have bounced back really well and don't seem to be facing any kind of trouble at the moment. Crude oil is off its recent highs. The Euro has recovered and the dollar has dropped. US economy is showing signs of a gradual pick up and we haven't received any fresh bad news from the eurozone lately.

Results Today: Alembic, Alstom Projects, Asahi India, Balaji Telefilms, Ceat, Deepak Fertilizers, Dr. Reddy's, Electrosteel Castings, Emco, Essel Propack, GHCL, Grasim, HUL, IDBI Bank, Indiabulls Securities, Ipca Labs, J Kumar Infraprojects, Jyothy Labs, SREI Infra, Sterlite Industries, Tata Coffee, Tata Sponge, Technofab Engineering, TIL, Trent, Ucal Fuel, UltraTech, United Phosphorus, Usha Martin and WWIL.

FIIs were net buyers of just Rs 639.5mn in the cash segment on Monday, according to the provisional NSE data. The domestic institutional institutions were net sellers at Rs 2.36bn. FIIs were net buyers of Rs 4.31bn in the F&O segment. The foreign funds were net buyers of Rs 376mn in the cash segment on Friday, according to the SEBI web site.