June 7 policy review to shape Indian equities
mumbai — The Reserve Bank of India’s monetary policy review, along with the finalised Goods and Services Tax (GST) sub-rates and the last of quarterly results are expected to affect the movement of key stock markets this week.
Market analysts observed that other major themes such as news on monsoon progress, global geopolitical situation and crude oil prices would impact investors’ risk-taking appetite in the highly expensive market environment.
“Some profit booking is expected and markets may witness some shallow correction; however, the trend in both the short- and medium-term remains positive,” Dhruv Desai, director and chief operating officer of Trade-bulls, said. “Banking sector stocks will be in focus with the RBI’s credit policy scheduled on June 7.”
According to D.K. Aggarwal, chairman and managing director, SMC Investments and Advisors, the recent inflation data and the slowdown in growth rate might give the central bank enough room to reduce benchmark interest rates.
“A surprise slowdown in Indian growth along with record-low inflation has created room for the central bank to ease interest rates,” Aggarwal explained. “However, it is expected to keep the repo rate unchanged in its upcoming meeting scheduled on June 7.”
Apart from the monetary policy review, foreign funds’ inflows and progress on the monsoon can trigger volatility.
Last week’s figures from the National Securities Depository revealed that foreign portfolio investors invested in a total of equities and debts worth Rs46.91 billion, or $726.51 million, during May 29 to June 2.
Provisional figures from the stock exchanges showed that foreign institutional investors sold stocks worth Rs4.54 billion, while domestic institutional investors purchased scrips worth Rs1.11 billion during the week.
“Markets will probably continue to be range-bound with a positive bias supported by domestic flows as well as local positive earnings’ surprises,” Devendra Nevgi, chief executive of Zyfin Advisors, said. Besides global cues, the last batch of quarterly company results will guide the movement of the markets.
“Markets continue to punish stocks with poor earnings vis-avis estimates. The idiosyncratic factors for single stocks would dominate too,” Nevgi added.
“The pharma sector seems to be attracting some value buying. Consumer-facing stocks would continue to run on back of earnings and monsoon predictions.”
On technical levels, the NSE Nifty is expected to remain in an intermediate uptrend.
The key equity indices had scaled new highs last week on the back of early monsoon onset, positive global cues and optimism about the GST roll-out.
A surprise slowdown in Indian growth along with record-low inflation has created room for the central bank to ease interest rates D.K. Aggarwal, chairman and MD, SMC Investments and Advisors