Sensex seen retracing to 6000, oil $50, gold $550

The Reserve Bank of India has moved swiftly to “maintain the domestic macroeconomic and financial stability in the context of the global financial crisis”. First, by slashing the cash reserve ratio by 150 basis points to 6.50 per cent on Oct 11 and today, by reducing the repo rate by 100 bps to 8 per cent.
The move comes just three days ahead of half-yearly monetary policy review on Oct 24.
The Indian central bank has already taken a number of measures over the last one month to augment domestic and forex liquidity.
However, the global financial situation continues to be uncertain, and India too is experiencing the indirect impact as reflected by some signs of strain in our credit markets in recent weeks, the RBI said.
On Sunday, the South Korean government announced a rescue package for its financial system by assuring $100 billion of lenders' foreign-currency debts and providing $30 billion in US dollars to banks.
Markets are reacting positively as and when authorities announce financial relief packages, but the positive effect is always short-lived.
Economists and analysts expect global market volatility to continue in the weeks and perhaps months ahead, because of the tremendous weakness in the world economy.
Investors are taking every opportunity to stay liquid on concerns the credit expansion will fail to stem the crisis and may not avert a recession. Traders, on the other hand, are profiting from the increased volatility.
However, the outlook is important to long-term investors who adopt a buy and hold strategy in the stock market. They are likely to suffer an extended period of low or zero growth.
CLSA has reduced India's GDP growth outlook to 6.5 per cent in view of considerable decline in the IIP for last couple of months.
India's Index of Industrial Production for August slipped to a 10-year low at 1.3 per cent compared to 10.9 per cent in the year-ago period.

source:indiatimes.com