Market Bracing Up for the Rate Hike !
- On the penultimate day of trading before the expected interest rate hike by the RBI, the interest sensitive stocks sold off and the indices closed at a two week low.
- The weakness in the market heavy weight stock Reliance is also adding to the woes of the market.
- It seems that a 25 basis point hike by the RBI is already discounted by the market.
- Any tougher than expected talk by the RBI together with the expected 25 basis point or an unexpected 50 basis point hike can lead to sell off in the market.
- Even otherwise, market has been lacking both volumes and trading interest for some time and therefore a break form the present trading range can be expected.
- Overnight losses in the international markets may also add to the negative momentum.
- However, a lower open and no hike or the expected 25 basis point hike together with some mild talk or an indication of the end of the hike cycle by the RBI may lead to a temporary short covering rally as well.
- The immediate lower support for the market is at the 5300 to 5350 levels coinciding with the rising long term lower boundary of the trading channel. ( Please see the Nifty Index weekly chart below. ) Though Nifty index has a minor support at the previous swing low of 5175 - 5225 area, the break of the long term support line at the former level may lead to a deep sell off as well.
Nifty Futures - Intra-day Chart
Nifty Futures - Daily Chart
