Markets may open higher; RBI policy in focus

Markets are likely to extend gains, amid firm global cues, with defensive shares leading the gains even as bank shares are likely to remain subdued ahead of the Reserve Bank of India's policy meet later today which is widely expected to maintain status quo on key rates.

At 8:40AM, the early indicator SGX Nifty was up 32 points at 8,725.

"Two rate cuts have taken place this calendar year but the transmission and impact of the same is yet to seen. The central bank is expected to stand pat with the interest rates; however it can indicate an inclination to reduce interest rates provided that inflation moderates further. Unseasonal rainfall in many parts of the country has given rise to the threat of rise in food inflation, which restricts the RBI’s maneuverability on the interest rate trajectory," points out a morning note from IIFL.

"It seems the central bank will take a pause after the two unscheduled cut in the repo rates this year. Meanwhile, market participants expect the RBI to tinker with the liquidity tools, wherein the consensus is calling for some cut in the CRR," it adds.

Despite the upmove seen, technical analysts are still not convinced if the markets will be able to sustain at higher levels.

"The Nifty has now surpassed the 8650 mark; but considering the price structure of the higher degree chart, we are not getting comfort to stay aggressively long in the market. Due to ongoing optimism, the current bounce may extend further towards 8700 - 8780 levels; but it remains to be a strong resistance zone. On the flipside, Monday's low of 8573 would now be seen as immediate support for the index," technical analysts point out in a report.

GLOBAL MARKETS

Most Asian markets which were closed yesterday resumed trading today and edged higher tracking overnight gains on Wall Street. Shares in Japan and China were among the top gainers with both the benchmark indices viz Nikkei and Shanghai Composite up over 1% each. Singapore's Straits Times was up 0.5% while Hong Kong market was closed for trading today.

US stocks ended higher on Monday on expectation that the US Fed would not raise interest rates on account of weaker-than-expected jobs data released last week. The Dow Jones gained 118 points at 17,880.85, S&P 500 gained 14 points at 2,080.62 and the tech-laden Nasdaq ended up 30 points at 4,917.32.

STOCKS IN FOCUS

REC will be in focus after the government said it will divest 5% stake in the state-owned company through the offer for sale route on Wednesday.

The Aditya Birla group has proposed to merge Madura Garments, MGL Retail Undertaking, and Aditya Birla Retail with listed Pantaloons Fashion & Retail in a share-swap deal.

Kotak Mahindra Bank will see some action after its board fixed April 17, 2015 as the record date for the purpose of ascertaining the shareholders of ING Vyasa Bank Limited who shall be entitled to the shares of Kotak Mahindra Bank Ltd.

HDIL may extend gains after Merrill Lynch Capital Markets Espana bought 58.16 lakh shares of the company through a bulk deal on the NSE at an average price of Rs 115.25 per share.

Cairn India will see some action after the company on Monday filed a petition in the Delhi High Court here against a Rs 20,494-crore tax demand, seeking quashing of the order.