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India Market Weekahead – Reforms, RBI rate cut could help Nifty break 5,800

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There was consolidation within a narrow Nifty band of 5,640 and 5,720 last week, with a bit of volatility and a flat closing at 5,684.

Heavyweight results and political heat dominated the mood on the street. The government’s reform agenda continued with a Group of Ministers (GoM) panel clearing a watered down land acquisition bill, a development which was cheered by industry leaders only to be later vetoed by Congress chief Sonia Gandhi. The much awaited expose by activist-turned-politician Arvind Kejriwal failed to create ripples.

Oil prices saw a correction as euro zone uncertainty on the Spain bailout continued to affect sentiment. The rupee weakened by 1.73 percent during the week to close at 53.84. FIIs have also reduced purchases after relentless buying in the past few months. WPI inflation edged up to 7.81 percent in September compared to 7.55 percent the previous month due to the hike in diesel prices. Despite high inflation figures, the Reserve Bank of India (RBI) is expected to cut repo rates by 25-50 bps on Oct. 30 to support growth following government policy action in the last few weeks.

Euro zone banks will be moving towards a single supervisory mechanism with an agreement to have the legal framework in place by January 2013. This could bring some stability unless there are any shocks from Greece or Spain.

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