RBI policy review, Q1 results to steer markets (Market Outlook)

The Reserve Bank of India's monetary policy review and the ongoing quarterly results season are expected to determine the trajectory of equity indices next week.

According to market observers, global geopolitical situation and macro-economic data points will also impact investors' risk-taking appetite.

"RBI's monetary policy review slated for next week is going to be one of the most important events that will influence the equity markets," Devendra Nevgi, Chief Executive of Zyfin Advisors, told IANS.

"Markets have already discounted the possibility of a 25 basis points cut. Investors will also look forward to the language and cues that RBI will give on the future inflation scenario and rate cut outlook."

In its last review, the RBI had kept the key lending rate unchanged. However, deceleration in recent consumer and retail inflation data points has spurred expectations of a rate cut.

Apart from monetary policy review, quarterly earnings results will be the other major theme for the week.

"Though at present the valuation of the market looked little stretched, the long-term outlook of the domestic market is bullish, given the government's policy reforms, a stable macro environment and liquidity flow from global and domestic investors, to name a few," D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, said.

Companies like Indian Oil Corp, M&M, Power Grid, Marico, Lupin, Titan, Punjab National Bank and Reliance Power are expected to announce their Q1 results during the upcoming week.

"Earnings have become very critical as the PE (price-earnings) ratio are exceeding the current earnings. In the near term earnings need to catch up with the PE ratios for the markets to move higher," Nevgi explained.

"Global markets development will also have a profound impact on the domestic indices. Geo-political situation such as developments on the Korean peninsula might bring short-term volatility."

Besides quarterly results, macro-economic data points like Index of Eight Core Industries (ECI) figures and the country's fiscal deficit data up to June will be keenly watched by investors.

In addition, monthly automobile sales figures and the Purchasing Managers' Index (PMI) manufacturing and services data will become other major sentiment drivers.

On technical levels, uptrend is expected to continue, as NSE Nifty is expected to reach a new high after crossing the immediate resistance level of 10,026 points.

"Technically, the underlying trend remains firmly up and the coming week could see the Nifty attempting to move to new life highs," Deepak Jasani, Head - Retail Research, HDFC Securities, told IANS.

"Immediate resistances are at 10,026 points, while crucial supports to watch for any weakness are at 9,827 points."

Last week, key indices made gains on the back of persistent inflow of foreign funds, coupled with healthy quarterly results and positive global cues.

Consequently, the 30-scrip Sensitive Index (Sensex) of the BSE closed at 30,309.88 points -- up 280.99 points or 0.88 per cent from its previous week's close.

Similarly, the NSE Nifty closed higher by 99.25 points or one per cent to 10,014.50 points.

(Rohit Vaid can be contacted at rohit.v@ians.in)

--IANS

rv/nir/vt