Sunday, December 7, 2008

Are Markets ready for a Santa Rally?

(My Original Blog Post: -*
source: stockezy

RBI interest rate cuts, lower petrol & diesel prices, lower Central VAT and an immediate $ 4billion and proposed total $15billion economic stimulus plan all bode well for a market rally in the making. Now will we see 10,000 levels for Sensex, I am not sure but the sentiment surely is very positive.

So what did PM & FM Manmohan Singh's plan say or tried to do? The immediate fall out can be summarized in the following:

* 4% reduction in central VAT, means cheaper CARS. Maruti, Tata & Mahindra all have decided to pass on the reduction to the consumer.
* But this will also cost the government 87 million rupees in reduced tax earnings for end of 31st march 2009.
* Broadly the stimulus is targeted to power exports, housing, auto, small and medium industries and infrastructure sectors .
* For new Home Buyers, the public sector banks will announce a new package for home loans between 5lakh and 20lakh rupees.

Most of the details of how the spending will take place is not known. But one thing is for sure is that the UPA government wants to bring growth back on track before the May 2009 elections. The new target is 7.5%  GDP growth for year end 31st march 2009.

The RBI rate cuts are directly take another aim at increasing the liquidity and cash flow in the market and make it easier for businesses to now borrow money. But I think the bigger question is that will the non state banks also ease lending rates? Will have to wait and see. If the RBI had reduced the CRR then I think the situation would have been more clear cut and banks like ICICI, Yes, Axis would have eased prime lending rates.

Overall I am feeling confident to see sensex and nifty open positive, but more clear indication has to be seen in the coming weeks.

For Sensex:

Look for 9180, 9330, 9600 and 9800 as key resistance levels.

For Nifty :

2800, 2950 and 3010 as resistance levels on the upside.

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