Pre- Market Analysis (5th May 2022)

U.S Markets closed higher yesterday.
Asian markets are higher.
SGX nifty is up 150 points.
Yesterday was a very tricky and unexpected session.
As soon as Market opened there was a continuous selling.
Market was falling left , right and center without taking any support.
I was wondering why is the Market going against the global cues
Then we got the news about RBI Governer press conference.
So some informed people already knew about this rate hike.
Hence there was a sudden selling in the markets.
RBI hiked repo rate by 40 basis points and Cash Reverse ratio by 50 basis points.
Repo rate is the rate at which banks borrow money from RBI.
When the rate is increased banks borrow money at higher cost and in turn loans also get costlier.
This slows down the growth and liquidity in the Market temporarily.
Cash reserve ratio is the interest free deposit money which banks have to keep with RBI.
RBI uses that money without having to pay any interest on it.
Increasing CRR means RBI is trying to curb liquidity in the Market.
Banks keeping more money with RBI means lesser loans in the economy leading to lot less liquidity.
Sudden decision of rate hike has spooked the markets.
When RBI knows it's negative for market and economy in the short run , why go for it then?
The reason is inflation.
When people have more spending capacity the seller controls the price as there are many buyers for one seller
Fed had prepared markets well in advance for the rate hike.
That's the reason even after the rate hike Dow rallied 1000 points.
It was totally a bad decision by RBI yesterday to give a shock ahead of LIC IPO.
Nifty might Trade between 16600 to 16900 today.
stockmarketadvisory.in

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