In past there is virtually no trend as to how market reacts to a rate cut or hike.
However, the only time the rate cut happened after a 5% or more market rally in the preceding month was in January 2009. The market fell 3% in the month following the rate cut.
On four occasions since 2001 Sensex has fallen 5% or more in one month preceding the rate cut. On two of these occasions, Sensex was also down one month after the cut.
In our view, rate decision today will have little impact on the market direction in next one month.
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