Markets eye RBI moves, F&O expiry; turbulence possible

Will also closely watch Q1 results of some top companies to sense the impact of results

Stock investors might need to brace for heightened volatility in the week ahead. The July series derivative contracts expire and uncertainty lingers on the Reserve Bank of India (RBI)’s steps to reduce the rupee’s volatility.

Investors will also closely watch the first quarter results of some top companies to get a sense of the impact of the economic slowdown on their earnings.

Battered bank shares could reverse recent losses on short-covering, which could aid a surge in indices because of their weightage on these gauges. Investors will also keep a close watch on likely hints by RBI on the rollback of last week’s move to tighten short-term money supply. The measure was aimed at smoothening the rupee’s volatility. “What will move the market now is the step taken by the RBI to stabilise the rupee,” said Sonam H Udasi, head of research at IDBI Capital Markets.

The central bank’s moves had caused the sentiment in banking shares to sour further. The outlook for the sector was already hazy because of asset quality issues and weak credit offtake but a section of the market considers the banking index’s fall of 13 per cent so far this year as excessive.

“We believe that banking stocks are trading at impressive valuations. Short-covering in this sector is likely to push it up this coming week,” said Gaurav Bhandari, senior vice-president of Centrum Capital.

The results of top banks such as SBI, ICICI, HDFC and YES in the week will keep traders busy. Among companies, L&T, Cairn India, Wipro and Maruti Suzuki are among the top names whose results are due over the week.

“The dollar tailwind and the decent earnings numbers posted by companies in the pharma, information technology and fast moving consumer goods sector has seen these stocks picking up and gaining interest among investors,” said Udasi.

Technical analysts expect the National Stock Exchnage’s benchmark Nifty to find support at 5,970 and resistance at 6,200. The Nifty closed at 6,029 on Friday and the BSE’s Sensex ended the week at 20,149.

 “The Nifty will breach the 6,180-level before the expiry, on the back of short-covering in banking sector stocks, some of which are trading below their 200-day moving average,” said Alex Mathew, head of research at Geojit BNP Paribas Financial Services.

Mathew added that huge short positions had been created in the futures and options segment, which could lead to stocks crashing after the expiry session.