MFs see a weak market ahead on CRR hike

Fund managers see equity market opening down next week following the Reserve Bank of India hiking the cash reserve ratio and the repo rate. In the debt market, bond yields will harden following Friday's hike in CRR and repo rate by 50 and 25 basis points, respectively.

RBI hiked the repo rate to 7.75 per cent with immediate effect to squeeze liquidity. In addition, banks' CRR was hiked by 50 basis points, in two equal stages, to 6.75 per cent.

The first stage of the CRR hike comes into effect on April 14 and the second on April 28. "Market will weaken as the hikes (repo and CRR) have come as a surprise," said Mihir Vora, head-equities, HSBC Mutual Fund.

He expects a correction Monday or Tuesday. But later in the week, the market will focus on fundamentals and valuations and is likely to stabilise, he said. The market is expecting corporate earnings of the last financial quarter to be good.

"Volatility will continue to remain in the market as the economy is still not stable," said SBI Mutual Fund equity fund manager Jayesh Shroff.

Nikunj Doshi, vice-president-equities, Kotak Mahindra Mutual, also expects the market to be fluctuating ahead of the fourth quarter results of Infosys Technologies.

As is typical, On April 11, IT bellwhether Infosys Technologies will be the first Nifty share company that will declare its earnings for January-March.

Kotak Mutual's Nikunj was of the view that the market will also take cues from US personal spending data released Friday and Japan's economic data that shows deflation has bounced back. Consumer spending in the US registered a more than expected 0.6 per cent gain in February following a 0.5 per cent January increase.