RBI monetary policy, fourth quarter results to set market pace

MUMBAI: The outcome of the Reserve Bank of India’s ( RBI) monetary policy will determine the direction of the markets in the days ahead. As Dalal Street forecasts a 25-bps interest rate cut by the central bank on Tuesday, markets could decline if the easing is just in line with expectations or below. More importantly, investors will watch the commentary to gain insights into future rate cuts and liquidity. Once the action around the monetary policy subsides, investors will shift focus to fourth quarter corporate results Benchmark indices gained 6-7% in March partly on expectations of a rate cut after the government maintained a stiff fiscal deficit target in the Budget. The Sensex closed at 25301.70 and the Nifty ended at 7718.05 on Friday.

“A rate cut of 25 bps has already been discounted. Anything above that will surprise and move markets. More importantly, RBI’s take on liquidity and its fan chart on inflation will be key,” said Sachchidanand Shukla, senior vice-president, at Axis Capital Foreign investors have been on a buying spree, pumping over Rs 27,100 crore into Indian equities in March. In January and February, they net sold shares worth Rs 19,300 crore. Markets will closely look at what the central bank would do to ease liquidity, said Shukla.

Another factor that will drive the markets will be the results season that will kick off soon. “The earnings season is around the corner and one shall start building positions in the stocks that are likely to deliver strong PAT growth,” said Vivek Mahajan, head of research at Aditya Birla Money. “One should be very cautious and only buy quality stocks with a steady earnings trajectory in a staggered manner from medium to long term perspective.”