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Key local and global events will decide the course of market next week, but bias for the indices remains positive. Market will largely take cues from the US Federal Reserve's monetary policy meeting on Wednesday as to when it will start tapering its $85-bln-amonth bond purchase programme. The Reserve Bank of India's mid-quarter policy review, due on Friday, will be another key trigger for the market. The likely impact of a rollback of US Fed's easy money policy has largely been factored. However, if the stimulus is cut back by $10 bln-$15 bln, it may be negative for the market. In the unlikely event that the Fed decides to start the rollback later by December, it may be mildly
positive for the market. Some tapering off is already priced in and to that extent, if the actual amount of taper matches’ expectation; it may not be taken negatively by the markets. Most traders expect the US Federal Reserve to start tapering its stimulus from this month. However, fears about the outcome of the US Fed meet led to volatile trade yesterday. On the monetary policy front, if RBI announces a reduction in the Marginal Standing Facility rate, it would be positive for the banking sector. Market participants expect a cut in the Marginal Standing Facility rate from the current 10.25%, after Raghuram Rajan took over as governor of Reserve Bank of India and announced measures to protect the rupee. We expect the RBI to persist with July tightening (of hiking the MSF rate by 300 basis points) till mid-December unless the Fed defers tapering on September 18. Next week, Bank Nifty is likely to move in the 9950-10500 range. Small and mid-cap banks will preferred among banks.
Bouts of selling may be seen depending on the outcome of the key events. India's headline inflation rate for August based on the Wholesale Price Index, due Monday, may not affect the market significantly. Capital goods companies, which gained on betterthan- expected industrial production data yesterday, are seen rising more. Bharat Heavy Electricals, which was the top gainer on Nifty yesterday.
Key local and global events will decide the course of market next week, but bias for the indices remains positive. Market will largely take cues from the US Federal Reserve's monetary policy meeting on Wednesday as to when it will start tapering its $85-bln-amonth bond purchase programme. The Reserve Bank of India's mid-quarter policy review, due on Friday, will be another key trigger for the market. The likely impact of a rollback of US Fed's easy money policy has largely been factored. However, if the stimulus is cut back by $10 bln-$15 bln, it may be negative for the market. In the unlikely event that the Fed decides to start the rollback later by December, it may be mildly
positive for the market. Some tapering off is already priced in and to that extent, if the actual amount of taper matches’ expectation; it may not be taken negatively by the markets. Most traders expect the US Federal Reserve to start tapering its stimulus from this month. However, fears about the outcome of the US Fed meet led to volatile trade yesterday. On the monetary policy front, if RBI announces a reduction in the Marginal Standing Facility rate, it would be positive for the banking sector. Market participants expect a cut in the Marginal Standing Facility rate from the current 10.25%, after Raghuram Rajan took over as governor of Reserve Bank of India and announced measures to protect the rupee. We expect the RBI to persist with July tightening (of hiking the MSF rate by 300 basis points) till mid-December unless the Fed defers tapering on September 18. Next week, Bank Nifty is likely to move in the 9950-10500 range. Small and mid-cap banks will preferred among banks.
Bouts of selling may be seen depending on the outcome of the key events. India's headline inflation rate for August based on the Wholesale Price Index, due Monday, may not affect the market significantly. Capital goods companies, which gained on betterthan- expected industrial production data yesterday, are seen rising more. Bharat Heavy Electricals, which was the top gainer on Nifty yesterday.
