The RBI’s monetary policy announcement did not do much to improve the market sentiment. The clear shift in stance, willingness to be accommodative, the confidence on inflation management and a decisive bend to act and do more if necessary were all simply not enough to reassure markets.

The markets seem to be atoning for its own overtly bullish NBFC stance and expecting the RBI to step in with swift remedies. Clearly, the RBI was in no hurry to stick its neck out on NBFCs and restricted itself to a cold, transactional position. The nagging worries on how badly banks will be affected by the NBFC crisis and the mutual funds by the HFC crisis will haunt markets for a while.

The only remedy is a swift change in ownership of troubled HFCs and NBFCs. But, that is not going to be easy. As clarity emerges and problems are solved, markets will see fears recede. But, confidence in financials seems restricted to very select pockets.

The coming weeks will see markets get more nervous as budget blues set in. With economic data hardly inspiring, only swift policy moves will shift sentiment to a better trajectory. The ball is now in the government’s court.

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