The markets had a fairly good last week, starting with a positive session, and thereafter, gradually moved up and closed for the week above 5300 in case of Nifty. Major economic events backed last week’s trade with domestic economic data and RBI decisions helping the markets to retain weekly gains. The major economic data was inflation for the month of March. The annual rate of inflation, based on monthly WPI, stood at 6.89 per cent in March, compared to previous month’s 6.95 per cent and 9.68 per cent during the corresponding month of the previous year. Price of pulses which had softened earlier, rose an annual 10.05 per cent in March compared to previous month’s 7.91 per cent. Vegetable prices rose an annual 30.57 in March, while milk prices shot up 15.29 per cent year-on-year during the month. Egg and meat prices remained stubborn rising 17.71 per cent year-on-year.

Policy
Another major event during last week was the RBI policy review, which was scheduled on Tuesday. It was widely expected that the RBI would reduce interest rates this time by around 25 bps given the slowing inflation and weak IIP numbers. The RBI, at its meet, reduced the Repo rate by 50 bps, for the first time in three years, to 8 per cent in order to boost the slowing economic growth. The RBI warned that there is limited scope for further rate cuts. The RBI left unchanged the cash reserve ratio at 4.75 per cent, in line with expectations, after cutting it by 125 basis points since January 2012 to ease tight market liquidity. It expects headline inflation to remain stubbornly above 6.5-7 per cent and also warned about rising fiscal deficit. RBI directed the government to take necessary action to reduce the subsidy burden by freeing diesel, LPG and kerosene prices.