Markets

RBI policy, Budget after-effects and Q3 numbers to steer market this week

NEW DELHI: Dalal Street investors would want to quickly forget the Black Friday, but the bulls will have newer challenges waiting during the week ahead, with RBI policy review and adverse global cues threaten to keep investors on the tenterhooks.

Equity benchmarks Sensex and Nifty plummeted over 2 per cent on Friday, posting their biggest single day fall in nearly 15 months.

Re-introduction of LTCG (long-term capital gains) tax on equity, concerns over fiscal slippage, profit booking and a global sell-off together broke the back of the bulls, who were, till now, the clear winners in the battle.

The RBI policy review will be the next big event, scheduled for this week. Here is a look at the key events that will steer the domestic market in the coming week.

RBI Policy meet: The monetary policy committee (MPC) of the Reserve Bank of India (RBI) is slated to meet on February 6 and 7, with its decision due on Feb 7. This will be the sixth bi-monthly monetary policy meet of FY18. Speculations and reports suggest the central bank may tighten its stance, as the government's fiscal deficit target has been revised upwards to 3.5 per cent from 3.2 per cent projected earlier. Retail inflation rose to a 17-month high of 5.21 per cent in December.

Other reports suggest inflation worries are overdone and RBI may cut interest rate by 25bps in April meet. "We expect RBI MPC to look through the jump in inflation to 5.4 per cent in April-June, which is spooking some parts of the market, as it emanates from the base effect of low 2.2 per cent April-June 2017 inflation," analysts at Bank of America-Merril Lynch said recently.

"We still expect the RBI MPC to cut policy rates by a final 0.25 per cent in April," it added.

Budget after-effects: It will be worth a watch how investors react when trading resumes on Monday. Friday's mayhem was knee-jerk reaction as the FM Jaitley delivered the bitter pill in the form of re-introduction of LTCG tax, thus spoiling the mood of investors in a big way. However, commenting on Friday's market fall, Jaitley said profit taking, Asian selloff and confusion over grandfathering were the main culprits behind the bloodbath on Dalal Street.

Next batch of quarterly earnings: Among prominent names, Bosch and Tata Motors will announce Q3 results on Monday, February 5; Hero MotoCorp and Lupin are slated to release their numbers on Tuesday, February 6, while Cipla and Eicher Motors will declare theirs on Wednesday, February 7. BPCL, HPCL, M&M, ONGC, SBI and Tata Steel will announce numbers on Friday, February 9.

Nifty may slide to 10,500 next week
The Nifty50 index on Friday formed a 'Long Black Day' candle on the daily chart and 'Bearish Engulfing' pattern on the weekly chart, prompting analysts to worry over next week's trading range. "The pace with which the Nifty50 fell suggests a trend reversal in favour of the bears and, hence, a multi-week top might be in place at the recent high of 11,171, as the index breached critical short-term support points," said Mazhar Mohammad of Chartviewindia.in. Selling shall get extended into the next week and take the index towards the 10,500 level, Mazhar added. Another market expert, Milan Vaishnav, CMT MSTA, feels the market may still take some time before it fully digests the Budget.

Macro numbers: The performance of India's services sector in January, 2018 will be known on Monday, February 5. The Nikkei India Services Purchasing Managers' Index (PMI) Business Activity Index rose to 50.9 in December from 48.5 in November. A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.

Global cues: The domestic market will take cues from global stocks and tread accordingly. US non-farm payrolls grew by 2,00,000 in January and the unemployment rate stood at 4.1 per cent, while wages saw their biggest jump since the end of the Great Recession, said a CNBC report. Economists surveyed by Reuters had been expecting jobs growth by 1,80,000. US stocks are likely to show an impact of this robust jobs report, which will be watched keenly by markets across the globe, including India.

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