The Prime Minister was sworn in just last Monday and already it seems many decisions have been taken. The government seems to have well begun and wants to take the momentum forward.
The government has announced a ten point agenda of its priorities. Having a simple majority in the house it has scrapped all EGOM’s and inter-ministerial groups which were formed by the previous governments. Typically the idea of these groups was to discuss with allies and have decisions taken but invariably things got delayed in bringing about consensus. The government has also set up a SIT on bringing back black money as directed by the Supreme Court.
The contentious issue of gas prices is to be resolved but the government has got a breather in the form of Reliance Industries referring the matter to the Supreme Court and asking for arbitration on the issue. The matter becomes subjudice, and gives the government time to discuss and decide how they want to go about it.
The markets were in some sort of a correction mode after the sustained rise over the recent weeks and months. The markets need to consolidate and sustain at these levels and need triggers to move further. The President would be addressing the Joint session of Parliament in the following week and that would give some idea of the vision and direction of the Modi government and their agenda.
In the coming week on Tuesday RBI has its review met here the wide consensus is that things would remain unchanged. Playing the contrarian and my hunch, I believe that there may be a token rate cut. The logic for the cut is that with the government and the RBI governor both being on the same side as far as inflation is concerned, a concerted thrust could be given to kick start the economy.
Already agri commodity prices have started to soften and with the government intent on cutting subsidies, reducing inflation and improving the supply side, if a small cut could help why not. A similar example was there when just before the 2013-14 budget was to be presented, the then RBI governor had announced an unexpected rate cut. The Railway Minister did raise fares and his party Trinamool Congress forced a roll-back of fare hikes and subsequent resignation s Railway Minister.
When the RBI could take a view on the basis of intent of the government which was already three years old, why can a similar view not be taken when the government is just one week old? I believe there is sound logic and this can be a long shot on RBI view. This is not expected and would create a pleasant surprise and also bring out new momentum in the market.
J&K Bank had an unscheduled concall on Friday post the share being under pressure when a newspaper of Kashmir mentioned non provision of some sticky loans. The call was unimpressive and the management was unable to convince investors. Further the entire call was fixed with people unknown to the management having their lines disconnected once they queued up for asking questions. I had the experience on four occasions and finally realised that the name is sensitive enough and did not bother in continuing with the call or getting a question asked. The management still has to convince the analyst community and do a lot of hard work.
Markets would be range bound in the coming week in a broad band of 24000-24900 for the SENSEX and 7,050-7450 for the NIFTY. The surprise rate cut could act as a trigger, otherwise prepare for a fairly quiet week after three hectic weeks.
