Market on the edge ahead of a week full of events

Sensex, Nifty may test levels of 17,530 and 5,342, respectively, on favourable outcomes

The stock markets will be on tenterhooks, given the several crucial events lined up this week. Tomorrow, the market will first react to the outcome of Greek elections and the Reserve Bank of India’s (RBI’s) mid-quarter policy review.

Focus will then shift to the announcements made at the G-20 summit and the two-day US Federal Reserve meet, starting Tuesday.

On the domestic front, political developments like a decision on the next finance minister and the future of the Mamata Banerjee-led Trinamool Congress within the United Progressive Alliance, will have a bearing on investor sentiment.

The outcome of the Greek election will determine whether the nation continues with austerity measures to stay in the Euro zone or rejects the bailout conditions and risks the turmoil of exiting the 17-nation currency. Investors will also look for any kind of economic stimulus from the US Fed, when it meets on June 19 and 20.

ACTION-PACKED WEEK

• Greece election result
• RBI mid-quarter policy review
• G-20 Summit
• US Fed meet 
• Euro zone finance ministers meet

Back home, investors have built expectations that the RBI will reduce both the repo rate and cash reserve ratio by a minimum of 25 basis points each.

All these events have the potential to move the markets sharply and investors will be watchful of the outcomes. “We believe the markets have already discounted the positives to some extent. A win for the incumbent Greek government will be a positive trigger. A higher-than-expected rate cut will take the markets higher,” said Dipen Shah, head of fundamental research, Kotak Securities.

The Indian markets have posted two successive weeks of gains supported by positive global cues and expectations of rate cuts by the central bank.

The benchmark Sensex has rallied nearly 1,000 points, or 6.2 per cent in the past two weeks. The 30-share index on Friday closed at 16,949.83, up 271.95 points, or 1.63 per cent, while the board-based Nifty ended at 5,139, up 84.3 points, or 1.67 per cent.

The Congress party’s decision to snub key ally Mamata Banerjee, who has been blocking several reforms, by going against her will in choosing the presidential candidate, is being seen as a positive development by market participants.

“There are expectations in the market that Mamata Banerjee will be out of the UPA, which will clear the way to push for major reforms. If this happens, it will be a big positive development and the market can move into a new range altogether,” said Ambareesh Baliga, chief operating officer at Way2Wealth Brokers.

According to technical analysts, if the outcome of the key events is favourable, the Sensex and the Nifty will test levels of 17,530 and 5,342, respectively. However, if the outcome is negative, these two indices may drop below their recent lows of 16,553 and 5,015.