Markets to focus on FII flows, global cues this week

Investors expect the government to push through some of the proposed market-friendly reforms

The extent of foreign fund inflows and trends in global equities could set the tone for Indian stocks in the weeks ahead. With the Reserve Bank of India (RBI) dashing hopes of some aggressive monetary easing in the months ahead, the mood on Dalal Street is sombre as investors have fewer domestic events to look forward to that are potential triggers for the market.

Investors will closely watch the industrial production data for March on Friday and results of key companies, such as NTPC and HDFC this week.

"Expectations of growth rates are muted at this point. Markets have already factored in some negativity and there are no major surprises expected," said Dipen Shah, senior vice president - research, Kotak Securities.

Technical analysts are expecting benchmark indices to move in a tight band between 5,850 and 6,050 with action in specific mid-cap stocks. The Nifty closed at 5,944 on Friday, down 1.2 per cent from the previous week.

Investors will watch trends in foreign institutional flows as worries have heightened on whether these investors would continue to pour in money with the US economy showing signs of strength. In April, these investors poured roughly $1 billion into Indian equities. If foreign institutional investor (FIIs) inflows slow down further or reverse, the undertone could turn bearish as domestic investors have been selling.

Brokers and fund managers warn FII inflows could wane in the absence of additional policy moves after a rush of decisions in late 2012 and early 2013. With the ongoing Parliament session turning out to be a damp squib, investors expect the government to push through some of the proposed reforms after the session ends this week.

"This Parliament session has been an absolute washout. The Finance Bill had to be passed, but the other bills like the Food Security Bill and the Insurance Bill are still awaiting conclusion. Now, the talk is that the Land Acquisition Bill will be cleared through an ordinance," said Amish Munshi, senior fund manager, Tata Asset Management.

The strength in the US market is feared to spark FII outflows from emerging markets, such as India. On Friday, the US Dow and S&P indices closed at record highs after the US unemployment data turned out to be better-than-expected. Analysts said shares of software exporters such as Infosys and TCS could strengthen on news of an improvement in the US economy, which is their biggest market.