Friday, May 3, 2013

RBI Monetary policy - Impact on Banking Stocks!

By Waves Strategy Advisors, For more information on daily research report visit or write to
RBI cuts repo rate on 3rd May 2013 by 25 bps which was in line with many of the economist and market experts but does monetary policy drive stock prices?
In morning research update sent to our clients we mentioned the following, “In 2013, markets have closed negative on positive news and over past 2 times prices closed down on day of repo rate cut by RBI. 12 months Bond yield currently stands at 7.46% which we use to judge possibility of rate cuts. This yield indicates a possibility of 25 bps cut in repo rate at maximum and also a probability of no repo rate cut. In previous policy meeting a very important top was made at 6110 on policy day and ……..”
We continue to believe that events do not drive prices of stocks and result only in short term spikes and eventually the original trend resumes. The below article gives overview about Banking stock SBI irrespective of the monetary policy announcement -
SBI 120 mins chart:
Waves Analysis:
As shown on 120 mins chart, currently prices are at crucial juncture as it is quoting at 61.8%retracement of the previous down move (2550-1970). A move below 2225 will infuse selling pressure which can drag prices lower till ….. which is 61.8% retracement of the previous up move (1970-2360). However, a move above ………..
In published report, we have shown daily chart of SBI along with explanation to give the overall trend outlook in addition to short term 120 mins chart.
As per wave theory, prices completed wave (A) in the form of double zigzag pattern at 1970 and it is currently moving higher in the form of wave …..
In short, prices are currently at important juncture. A move below 2225 will confirm a short term top is in place whereas a close above ……… will open more upside possibility.
The above chart and explanation clearly indicates that the stock has moved exactly as per its trend irrespective of the monetary announcement. Prices are currently quoting at 2230 exactly at the support shown on the chart above. A closing will provide more clues on the overall trend for this banking heavy weight. 
Do not trade based on partial information but trade objectively and know crucial risk management levels. “The Financial Waves” daily equity research report gives holistic view on Nifty and different stocks.
By Waves Strategy Advisors, For more information on daily research report visit or write to

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