Markets are likely to see a bounce back on Tuesday, as equities across the globe recovered sharply. As the market looks technically oversold, the possibility of positive opening is bright, said analysts. However, with foreign portfolio investors continuing their selling, the sustainability of the recovery is doubtful, they cautioned.

The focus now shifts to RBI monetary policy that will start from December 8. With the threat of Omicron virus, most experts believe the central bank to maintain status-quo stance.

The street likely to witness a volatile session as investors brace for RBI Policy Outcome slated to release this week on Wednesday, said Prashant Tapse, Vice President (Research), Mehta Equities

Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank Ltd, said with the economy on an upswing, led by a surge in consumer demand and ample liquidity, it was expected that the MPC would opt for gradual withdrawal of excess liquidity and a change in its accommodative stance in the December policy. "However, the looming threat of Omicron and the uncertainty that it has set in motion means that it is now likely that the committee will keep key rates unchanged. A move on the reverse repo rate, which was largely expected in December, will now be postponed to the next calendar year.”

According to Emkay Global Financial, Although a close call, the RBI will likely avoid a cliff edge in the upcoming policy with any material reverse repo rate hike. "The policy will likely again be used as a lever to prepare the markets for a gradualist approach toward normalisation. The redistribution/re-pricing of existing liquidity via VRRR tenor/quantum/cut-offs has smoothly helped the alignment of some money market rates toward the Repo rate," it said and added" "We believe the markets will still be assuaged about any premature tightening of financial conditions."

70-point gap up opening

SGX Nifty at 17,032 (7.40 am IST), indicates a gap-up opening of 75 points, as Nifty futures on Monday closed at 16,957. Most equities across Asia-Pacific region are up in early deal on Tuesday between 0.5 and 1.25 per cent. However, Korea and Taiwan markets are trading flat while Chinese stocks remain subdued.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said: "Overall, we expect market volatility to remain high until there is clarity on the impact of the new virus. Also, FII selling has been pretty strong adding to the overall market weakness."

Nagaraj Shetti, Technical Research Analyst, HDFC Securities, said: "The short-term trend of Nifty continues to be negative. The sharp downward reversal of the last two session after a decent pullback rally could open further decline down to 16700 or lower in the next few sessions. Any upside bounce from here could find strong resistance at 17080 levels".

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