Wednesday, December 19, 2012

RBI Monetary Policy: Repo Rate unchanged!

Following was published in "The Financial Waves" research report by Wave Strategy. For subscription write to or visit
Bottom Line: Nifty hovered near the support of 5840 level. RBI monetary policy will provide the direction ahead.
The following was published in “The Financial Waves STU” on 18th December 2012 before equity markets opened.
12M Government Bond Yield:

Above is the chart of 12 Month Government Bond yield.  We use this chart to predict the next action of RBI monetary policy on repo rate. Generally, Bond markets act as a leading indicator for the government action. Last policy was announced on 30th October 2012 in which we have been right on no rate cut in repo rate.
Looking at chart we find no major movement in 12M bond yield and hovering near 8.02. In the last monetary policy bond yield were moving near same level and we did not have repo rate cut. So it is highly possible that today RBI will not cut repo rate in monetary policy.
It will be important to observe if Bond markets have been right even this time in predicting no repo rate cut and the reaction by equity markets after the announcement.

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