Will RBI maintain its “status quo”? What next for Nifty?

After Mr. Raghuram Rajan took over as new RBI governor past year there has been lot of surprises on the key policy front. 

The stance that new governor has taken is focusing more on inflation rather than growth which can be clearly reflected in the sluggish GDP data released and he is unmoved by the slow growth factor. Even last time RBI increased the rates surprising the street and even the Bond traders.

Today at 11 am RBI action will be closely observed but we do not think that has anything to do with the trend of Equity markets. Last time when RBI raised interest rates Nifty and Sensex closed positive even when the rate hike was surprise to many.

We use 12 Months bond yields to determine if the rate hike is expected by the Bond traders or not. Following is written in today’s morning research report “The Financial Waves short term update”

“Bond markets have shown some ease on the yields indicating that there should not be any further rate hike from here. The 12 month Government Bond yield tries to lead RBI actions but after the tweaking on MSF has started this indicator accuracy has reduced. However, if Bond markets are getting it right then RBI shall maintain its “status quo.”

So how will the equity markets behave?

Betting on RBI policy to judge the behavior of equity market is just like tossing the coin. As we said last time there was rate hike and market did not react negatively.

On Election day Mr. Modi won with a clear majority and Sensex showed negative tick even though momentarily after the event.

So food for thought is Does news really drives stock market? If not then what does?

Stock market discounts future and news are the output. It is mistaken the other way by many. However, news can result into short term spikes which might last from few minutes or few days or few weeks at times but eventually the major trend resumes!

Nifty 60 mins chart: Guess the pattern? 

The above chart of Nifty clearly shows a contracting pattern. In technical analysis it is called triangle. Prices are moving within the range since the Election result day. So which side do we expect the range to break as per Elliott wave counts?

To know how can we use this pattern to our trading advantage subscribe to “The Financial Waves short term update” which has basic as well Advanced technical concepts like Elliott wave on Nifty and 3 different stocks.  Visit for subscription options http://www.wavesstrategy.com/index.php/store.html