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Market cheers Reserve Bank of India's decision on rate cut

While the market cheered the rate cut, the undertone has been cautious as they don't see a slew of rate cuts happening going ahead. Inflation still remains a concern and the central bank will keep a close eye on data before it cuts rates going further.

twitter-logo Mahesh Nayak   New Delhi     Last Updated: October 4, 2016  | 15:20 IST
Market cheers Reserve Bank of India's decision on rate cut

Mahesh Nayak
The BSE Sensex jumped 100 points within seconds of the Reserve Bank of India (RBI)'s announcement of a 25 basis points (bps) cut in repo rates to 6.25 per cent. The market had already discounted that a cut was on the cards, which saw the BSE Sensex jump close to 380 points on Monday.

While the market cheered the rate cut, the undertone has been cautious as they don't see a slew of rate cuts happening going ahead. Inflation still remains a concern and the central bank will keep a close eye on data before it cuts rates going further.

Now that the event is over, all eyes will be on India Inc.'s corporate performance. The market has rallied on the back of liquidity and for it to rise further, corporate performance of companies will have to fire. Until financial performance doesn't improve, markets won't have legs to surge higher and will continue to remain rangebound.

While the market is cautious, events like US presidential election in November and global commodity prices will weigh on the markets.

As far as valuation is concerned, markets are not cheap and it would be advisable for investors to book profit and sit on cash. It's not a runaway market and until corporate performance does not improve and capacity utilization - which is around 60 to 70 per cent in most sectors -- doesn't see an up move and fresh investment in building new capacity, markets won't see any major rally.

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