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India Market Weekahead – Volatility expected ahead of RBI policy review

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

After a rally of 500 points on the Nifty, markets consolidated at slightly higher levels to close at 5850 this week. It’s evident that hope keeps the market ticking — this time it was various measures by the new RBI governor, Raghuram Rajan,that cheered the markets.

But expectations, at times unrealistic, could lead to disappointment. Though Rajan made the right moves, it would be interesting to see how he uses the limited manoeuvrability he currently has. The monetary policy review on September 20 would be closely watched.

Macro numbers such as IIP and consumer inflation were better than expected at 2.6 percent and 9.52 percent. Trade deficit narrowed to $10.9 billion while car sales rose for the first time in 10 months. Although IIP data was positive, a closer look shows capital goods growth, which has been highly volatile, was responsible for the better-than-expected numbers.

Consumer inflation showed divergent figures between urban and rural data. The trade deficit narrowed thanks to a restriction on gold imports while car sales were up on Maruti’s low base after being hit by strikes last August.

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