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This week, the Nifty and the Sensex will show data-dependent movement. There is strain on the benchmarks with the earnings season beginning on Friday with Infosys' results. The two could end up four to five per cent lower this week, over last week's close.
The street is not optimistic about the industrial growth and inflation numbers anticipated on Thursday and Friday respectively.
Market-men are expecting a 75-100 basis point repo rate cut on April 17 when RBI reviews its monetary policy.
There are multiple factors that the central bank needs to take into account before taking this step.
A rate cut could hit FII inflows whereas status quo may not.
In the absence of a rate cut, yield on 10-year G-sec is expected to cross nine per cent levels.
RBI biggest hurdle for a rate cut is inflation which hasn't abated in the last one year.
Plus, India Inc has been fairly successful in passing cost pressures to their customers in the last year.
An impending oil price hike, increase in support prices of agri-produce and a monsoon, which could go either way, would only stoke inflation.
The rupee could lose two per cent against the dollar this week in the absence of fresh FII inflows.
However, fresh FII inflows will take the rupee above Rs 50 levels to a $ to Rs 49.85 to a $ levels.
Globally the fear over the Euro zone continues over rising Spanish bond yields. Last week, the International Monetary Fund completed its third review of Portugal's performance under the three year extended fund facility arrangement worth €27.63 billion.
With this, Portugal will immediately receive around €5.17 billion from the IMF for “good progress” in implementing economic policies.
However, traders who are slightly bearish on the Euro could be in for a surprise and the currency could breach 1.3100 $ levels to a Euro. Yield on the benchmark US 10-yr treasury is expected be range bound between 2.2 and 2.5 per cent levels.
This could change and go below 2.2 per cent levels in case markets short equities and move to safer havens on concerns of Euro zone.
The bullish trend in Nymex crude futures would get confirmed if it closes this week above $ 108 to a barrel.
Finally, gold is expected to weaken from last week's $ 1,630 levels to an ounce and remain range bound between $1,590 and $1,610 to an ounce.
>raghavendrarao.k@thehindu.co.in
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