Markets

RBI meet, progress in monsoon among 6 factors that may guide market this week

NEW DELHI: With earnings season behind us, investor focus will now shift to the progress in monsoon and the Reserve Bank of Indias second bimonthly monetary policy review, which starts Monday.

The domestic equities witnessed seesaw trade last week, with the bulls retaining an upper hand. A government data showed that India reported 7.7 per cent GDP growth for January-March period, holding the tag of the fastest growing economy in the world. The full FY18 growth estimate was revised upward to 6.7 per cent from 6.6 per cent in the second advance estimate released in February.

Among individual stocks, Vakrangee finally made a U-turn to hit upper circuit on Friday after hitting lower circuit for 28 straight sessions. Multibagger Dilip Buildcon hit a speed bump, as the stock crashed in the last two sessions amid rumours that the auditors of the company had resigned. However, it rubbished the news in its BSE filing.

On Friday, the Sensex lost 95.12 points to end at 35,227, while NSEs Nifty50 index closed 39.95 points or 0.37 per cent lower at 10,696. On a weekly basis, the 30-share pack gained 0.86 per cent while 50-share pack Nifty added 0.85 per cent.

Here's a look at the key developments that may steer market in the coming week.

RBI policy outcome
The monetary policy committee (MPC) of the RBI is slated to meet on June 4-6, with the results due on Wednesday. There are possibilities that India might join the growing club of emerging-market central banks that have been tightening their monetary policy.

The apex bank may deliver its first interest rate hike in nearly 4.5 years, says a Reuters report. However, there are others who feel RBI may hold rates this time but will hike in the August and October policy reviews.

"While we expect the RBI MPC to hold the repo rate in June, we pencil in 50 bps hike in FY19 split between August and October. The MPC votes are likely to be evenly balanced in the June meeting, thereby keeping the chances of a rate hike alive," says Suvodeep Rakshit, Vice-President and Senior Economist at Kotak Institutional Equities.

Technical factors
The Nifty index on Friday formed bearish candle on the daily chart. It formed higher highs and higher lows for the day and is likely to face resistance around the 10,800 mark next week. On a weekly scale, the index formed a 'Spinning Candle' with long shadows followed by a Dragon Fly Doji, which indicated a tough fight between the bulls and the bears, said Chandan Taparia of Motilal Oswal Securities.

Mazhar Mohammad of Chartview India noted that none of the technical parameters generated fresh sell signals on the lower time frame charts, and the market might gain strength if Nifty closes above the 10,777 level over the next few sessions.

Progress in monsoon
The investors on Dalal Street will follow the updates on how monsoon pans out in the country over the next one week.

"IMD has projected a third successive normal monsoon this year so timing and distribution of rainfall is also important parameter to look into going forward," PTI reported Teena Virmani, Vice President – Research of Kotak Securities as saying.

Services sector
The government is expected to unveil data on monthly survey of the performance of services sector in May on Tuesday. With growth in new orders and easing inflationary pressures also helping in improved demand conditions, the Nikkei India Services Business Activity Index climbed to 51.4 in April from 50.3 in March.

US jobs data
The US economy continued to add jobs at a solid pace in May, with non-farm payrolls up 223,000 and the unemployment rate falling to an 18-year low of 3.8 per cent. The closely watched employment report released by the Labour Department on Friday also showed wages rising solidly, cementing expectations that the Federal Reserve will raise interest rates this month and boosting the probability of two more hikes later in the year. It renewed fears about the economy overheating, Reuters reported.

Global cues
Investors will track G7 summit, which start next week in Quebec, Canana. Finance leaders of the closest US allies vented anger over the Donald Trump administrations metal import tariffs on Saturday, ending a three-day meeting with a stern rebuke of Washington, Reuters reported.

The 25 per cent steel and 10 per cent aluminum tariffs were imposed this week on Mexico, Canada and the European Union after temporary exemptions expired. This apart, both China and the US are slated to release their Balance of Trade data for May and April, respectively. Also, political situation in Spain may affect financial markets across the globe. Spanish Prime

Minister Mariano Rajoy has been forced out of office by a no-confidence vote in parliament.

This apart, trend in global markets, investment by FIIs and DIIs, the movement of rupee against the dollar and crude oil price movement will also remain on investors' radar.

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