Mkts likely to rise if RBI, inflation don't play spoiler: Analysts

The stock market is likely to continue its upward journey this week on the back of persistent inflows from overseas fund houses, analysts said.

However, the markets will be keeping a close eye on the RBI's September 16 mid-term monetary review and the release of August headline inflation (WPI) on September 14, which will set the course on Dalal Street, they said.

Boosted by robust industrial growth in July and positive global cues, the markets are expected to open on a firm note on Monday, brokers said.

"Investor sentiment got a fillip after strong IIP data for July and it will work as a booster for the market. We may see action in consumer good stocks, as this sector contributed 63 per cent to the country's industrial production during July," Bonanza Portfolio Vice-President Avinash Gupta said.

As per government data released on Friday, India's industrial output growth nearly doubled to 13.8 per cent in July, dispelling fears about a demand dip and prompting policy planners to hike their economic growth projections to more than 8.5 per cent.

There is a chance that the RBI may leave policy rates unchanged for a while or tinker with the repurchase (repo) rate by hiking it by 25 basis points, SMC Global Securities Research Head (Retail) Saurabh Jain said.

"The Index for Industrial production (IIP) and inflation are important in affecting any potential action by the RBI during its mid-September policy review. Consensus points towards a 25 basis points hike in policy rates," brokerage house ICICIDirect said in a note.

Analysts believe this is liquidity-driven market where we see valuations at fair level for short term, but said that a correction cannot be ruled out.

Buoyant investor sentiment saw the benchmark Sensex and Nifty indices scale 32-month high levels during the past week on heavy capital inflows, following a rebound in global markets. The domestic market was closed on Friday (September 10) for the Eid-ul-Fitr festival.

Registering one of the best weekly gains for the current calender year, the Bombay Stock Exchange benchmark Sensex rose 578.23 points, or 3.17 per cent, to end the week at 18,799.66, its best close since January 18, 2008.

Foreign institutional investors have made a net investment of Rs 3,402.90 crore in Indian equities so far in the current month, taking their total investment so far in the local stock market this year to Rs 62,784.50 crore.

On the global front, almost all major indices, including the S&P 500 and Dow Jones, ended in the green last week.