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Stock indices are likely to trade in a narrow band next week, eyeing overseas markets and companies' Jan-Mar earnings for cues. Despite yesterday's sell-off, market participants see limited downside for indices given the positive flows from foreign institutional investors. So far in 2013, FIIs have net invested $11.33 bln in Indian equities. But corporate earnings will lead to stock-specific action resulting in rangebound trade. Moreover, the Reserve Bank of India's remarks yesterday on future policy rate cuts may keep gains under check. Yesterday, the National Stock Exchange's 50-share Nifty ended below its resistance level of 5950 points due to profit booking after the central bank cut the repo rate by 25 basis points, in line with market expectations.
What dampened investor sentiment was the central bank's comment that the balance of growth-inflation risks leave less room for monetary policy easing. The RBI also said the biggest risk to the Indian economy emanates from the high current account deficit. The forward guidance, along with the hawkish language in the annual report released yesterday, suggests to us that the RBI is unlikely to cut (the rate) again in its Jun 17 policy meeting. Yesterday, the index ended down 2.5% at 12393.60. Adani Ports & Special Economic Zone, Adani Power, Allahabad Bank, UCO Bank, ABB, Housing Development Finance Corp, KEC International, Lupin, Ranbaxy Laboratories, Asian Paints, Punjab National Bank, and Union Bank of India are among the companies detailing their quarterly earnings next week.
