The FED met and did the inevitable – postponed the decision to the next meeting. Janet Yellen the chairperson decided to keep rates unchanged and the underlying thought behind her decision was China. What this means is that the guessing game would begin in four weeks’ time when FED meets in end October. Markets rose sharply immediately after the decision but soon thereafter lost ground and closed with losses on Thursday and Friday. The world markets rallied on Friday initially in Asia but Europe and Americas were weak.
Raghuram Rajan addressed a CII meet on Friday and gave his impression about the timing of rate cuts and the example of a ‘BRICS’ country Brazil. The example was uncanny and scary. The FM and his deputy too were clamouring for rate cuts but post Raghuram Rajan’s speech in Mumbai, the tone has changed completely. Rate cut has been left on RBI and it is a mere request now.
Our markets on Friday simply took off but seemed to have a correction half way through giving up more than half the intraday gains. Was it the realisation that rate cut may or may not happen or was it that there were no more short positions left to close out, one will never know. The fact remains that the rally was too swift to sustain and that is exactly what happened.
The last of the IPO’s to list would do so on Monday when Prabhat Dairy Limited lists. The company had initially set out to issue shares in a price band of Rs 140-147 which was revised downwards to Rs 115-126 and even then was not fully subscribed. The offer for sale portion was pruned and the issue closed. A total of 3,11,62,716 shares have been allotted at Rs 115 which means that the company has raised a total of Rs 358.37 crs from the issue. Retail investors have been given a discount of Rs 5 per share and there were a total of 33,403 applicants in the retail category.
The week has a holiday on Friday and this would therefore be a four day week. RBI meets on Tuesday the 29th September for its review meeting which makes effectively the meet a mere six trading days away. RBI and the rate cut to be or not to be will be the key driver in the coming week. Besides this global cues, China and what is likely in Greece which goes to polls at the end of the week will keep markets busy. Super volatility and virtually directionless at the end of the week on a net basis is how I would like to sum up the market going ahead. The gains of the previous week are likely to be squandered in the coming week. Trade cautiously.
