RBI meet, Eurozone worries to set mood for mkts this week

Taking positive cues from the US markets, Indian bourses may open with gains but the mood is likely to stay cautious as the RBI meets on Tuesday to take stock of inflation and European leaders moot a solution to the Eurozone debt crisis, say analysts.

The BSE benchmark Sensex last week shed 1.73% on high inflation and mixed global cues with downward bias.

This will be a short week for stock markets, with just three full trading days. Bourses will be closed on Thursday, October 27, on account of Hindu festival of Govardhan Puja and Vishwakarma day, while on Diwali, October 26, the market will open for just two hours in the evening for mahurat trading.

"Stock market will trade taking cues from day-to-day basis as this week is going to be an eventful one. Also, the market trend would depend a lot on the outcome of the European leaders meet, aimed at resolving the Eurozone's debt crisis," Unicon Financial Solutions CEO Gajendra Nagpal said.

He further said the market trend will remain cautiously optimistic as Indian corporates are expecting hike in key policy rates by the RBI at its policy review, which has already been factored in by the Dalal Street.

Alex Mathews, research head Geojit BNP Paribas Financial Services, said, "The US market ended on a bullish note on Friday which may lead to a gap-up opening at Dalal Street on Monday. Nifty can test 5,265-level and if it breaches this point, there is no going down for the market in the near-term."

On Friday, the US stock market gained, with the Dow Jones Industrial Average closing 2.31% higher, while S&P 500 settled up by 1.88% and tech heavy Nasdaq rose by 1.49%.

Meanwhile, markets elsewhere in Asia were cautious ahead of the European leaders meet for a solution to the Eurozone's debt problems.

"It is likely that the RBI will hike rates by 25 bps which is fairly discounted by the market. Derivative settlement shows that market will cross 5,250-mark as it is in an oversold mode and on Diwali we may see Nifty touching 5,350. However, post the festival we may re-test 4,900-level," CNI Research CMD Kishore P Ostwal said.

The Reserve Bank of India (RBI) quarterly review policy meet on October 25 is the big issue on which the market will heavily bank upon, according to traders.

"Market participants are awaiting outcome of the RBI policy meet and Eurozone leaders meet. If markets rise from here, we could again face selling pressure at higher levels, unless Nifty is able to close above 5,200 mark," said Milan Bavishi, Head Research at Inventure Growth and Securities.