New Delhi, Jan 28 (IANS): The latest Reserve Bank of India (RBI) measures worth Rs 1.5 lakh crore to inject liquidity into the banking system should ease the stress in money markets, while the start of bond purchases is also likely to drive rupee rates lower through signalling effect and expectation channel that RBI will avoid any tightening of liquidity conditions and will potentially need to do more open market operation (OMO) purchases, leading brokerages said on Tuesday.

According to a note by Emkay Global Financial Services, a turn in the liquidity cycle is a strong stimulant for domestic equities, and BFSI is the best way to play this in the short term.

"This is coupled with other positives -- earnings forecasts have held up through January 2025 and valuations are now more reasonable. This may not be the absolute low for the markets, but we think it is a good time to start nibbling into stocks where valuations are now reasonable," said Emkay Global.

Additional liquidity measures and a rate cut in February would have a more material impact, said brokerages.

"We believe, however, that this needs to be coupled with the easing of lending curbs imposed on banks and NBFCs since late 2023, especially on unsecured loans. This would bring back momentum to retail lending, and inspire a consumption bounce back in the second half of CY25. Given that the space for fiscal stimulus is low, this should be an important countercyclical imperative," Emkay Global noted.