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Trade in the local share market may remain volatile next week as several companies will detail Oct-Dec earnings, the Reserve Bank of India will detail its third-quarter monetary policy review, and the January futures contract expires. On Monday, the RBI will release the review of macroeconomic and monetary developments during Oct-Dec at 1700 IST, which will provide some clue about the central bank's policy action on Tuesday.
Market participants widely expect RBI to cut repo rate by 25 basis points. Earlier, economists had expected a 50-basis-point cut, but recent comments by RBI Governor D. Subbarao have tempered expectations to just 25 bps. A few remain optimistic and hope for a 50 bps cut in repo rate.
In fact, some of them are also of the view that RBI should not only cut the repo rate but also banks' Cash Reserve Ratio. The Reserve Bank of India must cut repo and cash reserve ratio by at least 0.25% points to revive investments and rejuvenate industrial growth. Indices are unlikely to see either a sharp rally or a downward correction in case RBI cuts repo rate by 25 bps.
But if RBI disappoints by leaving policy rates unchanged, market will see sharp selling that could take the National Stock Exchange's 50-share Nifty towards 5900 points. Despite ongoing jitters, the Nifty remained above 6000. We expect the positive bias to remain in the Nifty till it sustains above these levels. On the higher side, 6180 should act as stiff resistance.
