RBI policy review, earnings to set tone
Stock investors and traders may need to brace for choppy sessions this week, after three straight weeks of gains.
Though the stock market may open firm on Monday, mirroring gains in the US on Friday, after most European banks passed government stress tests, investors may pause to analyse the outcome of the Reserve Bank of India’s (RBI) interest-rate policy review on Tuesday and first quarter results of some companies. Traders are expected to shuffle their holdings ahead of the expiry of the June series derivatives contracts, adding to the volatility.
Analysts said traders are reluctant to buy at these levels, as they feel the market may correct after the credit policy meet, where the central bank is expected to hike policy rates by 25 basis points. “The monetary tightening has increased scepticism about the sustainability of the Nifty’s current rally,” said Girish Patil, manager-derivatives, Antique Stock Broking.
Investors fear a sharper hike in interest rates by RBI. “Our base case expectation is a 25-bp hike in both repo and reverse repo rates and no change in CRR. Any more aggressive tightening is unwarranted at this juncture in our view,” said Edelweiss Securities in a report.
US indices on Friday rose about 1% after the European Commission’s resilience tests on 91 European banks, comprising about 65% of the continent’s banking sector, showed most have passed. Among the leading companies that are scheduled to announce their results this week include Reliance Industries (RIL), SBI, Larsen & Toubro (L&T), Sterlite Industries, TechMahindra, NTPC, Hero Honda and ONGC. India’s largest private sector enterprise RIL is expected to come up with its April-June quarter numbers later this week.
“I don’t expect any major surprises in the quarterly numbers,” said Saeed Jaffery, oil &gas analyst, Ambit Capital. The company’s profit after tax (PAT) should be in the range of `4,760 crore while the GRM’s should be in the range of $7.62 per barrel.
Elara Capital expected RIL’s earnings to remain subdued. “The strength in the refining cycle has underperformed expectations so far in CY10. And as a result, we don’t expect any huge positive surprises for RIL in this quarter,” the broking house said.