RBI policy, global cues, monsoon to set market trend

Markets could take breather if RBI maintains status quo on interest rates

Although economists expect no rate cut by the Reserve Bank of India (RBI) at its second bi-monthly policy, global cues after US jobs data and the progress of the monsoon will set the trend in the weeks ahead.

In the week to June 3, benchmark share indices hit seven-month highs, driven by encouraging GDP growth, better-than-expected corporate earnings and above normal monsoon forecast. The Sensex ended up 0.7 per cent at 26,843 and the Nifty50 ended up 0.8 per cent at 8,221.

“The bullish trend in the markets continued after higher-than-expected GDP growth, better-than-expected corporate earnings and India Meteorological Department (IMD) maintaining above normal monsoon forecast. With the street expecting no rate cut by the RBI next week, global cues and the progress of the monsoon will be the key triggers,” said G Chokkalingam, founder and managing director, Equinomics Research and Advisory.

RBI at its policy meet on Tuesday is likely to maintain status quo on interest rates ahead of the US Federal Reserve policy review and the British referendum on European Union membership, according to all the 10 economists polled by Business Standard.

Tata Motors emerged the top Sensex gainer, up 12.5 per cent, after its robust March quarter results. Coal India surged nearly 10 per cent higher after the company raised prices by 6.29 per cent across all its subsidiaries for both regulated and non-regulated sectors.

Axis Bank ended nearly six per cent higher after RBI allowed raising foreign shareholding to up to 62 per cent in the company. Tata Steel edged three per cent higher after its overseas arm Tata Steel UK said it has completed the sale of its 4.5 million-tonne long products division to Greybull Capital.

Outlook

Markets could take a breather next week if RBI maintains status quo on interest rates at its policy meet. Further, investors will also await data from IMD on the southwest monsoon, with rains expected to hit the Kerala coast. The government is also scheduled to release data on the index of industrial production for April 2016.