Volatile Sensex ends 45 points down; RBI policy eyed

The market was highly volatile in the last couple of hours of trade, especially ahead of mid-quarter review of monetary policy tomorrow at 12 noon from the RBI. Market was in confusion whether CRR cut will happen or not. The Sensex recovered 240 points from day's low of 15,596.22, before closing down 44.67 points at 15,836.47. The Nifty fell 17 points to 4,746.35, after hitting an intra-day low of 4,673.85.

Earlier experts, especially before the inflation numbers, had been expecting a cut in cash reserve ratio (the amount of money that banks compulsorily have to park with RBI). But after yesterday's inflation for November that is still above 9%, experts feel the RBI may not cut CRR and even policy rates.

According to Robert Prior-Wandesforde of Credit Suisse, the RBI may take a dovish approach and not cut CRR rates in this meet. He also believes there is less likelihood of any changes in key policy rates.

"I don't expect explicit commitment to start cutting rates, but I presume, in the context of those poor real economic numbers, there will be at least a further nod in the direction of dovishness," he believed.

The recovery in the second half may be due to the appreciation in rupee from record low of 54.29 to the dollar. It was down 11 paise to 53.81 a dollar, at the time of closing of Indian equities. It seems that RBI may have stepped in to save the rupee by selling dollars.

Capital goods, banks and telecom sectors lost ground while shares of Reliance Industries, and FMCG and power stocks helped the market to trim losses in second half of trade.