Investors worry that the central bank's effort would add to the stress on the banking system and on companies. Some of the losses could be recouped if the government announces steps to curb the decline in the rupee. It is expected to unleash a slew of measures such as higher duty on non-essential imports and further liberalisation in the norms for raising foreign debt - these might cheer the currency market. Investors will also watch industrial production data, inflation figures and some big-ticket earnings numbers.
"The market believes the measures taken by RBI have not been sufficient enough to have a major impact on the market. So, the market will react positively if the government takes some major steps to help solve the current account deficit situation and, thereby, the rupee depreciation," said Sunil Jain, vice-president, equity research, at Nirmal Bang Securities.
Since May, the rupee has fallen 12 per cent, owing largely to the weakening current account deficit. Last week, the rupee touched an all-time low of 61.80 to the dollar, causing equity indices to decline by two per cent over the week. The BSE Sensex ended the week at 18,789 on Thursday, while the NSE Nifty closed at 5,565. The markets were closed on Friday
For the week ahead, technical analysts expect the market could see some reversal but range-bound trading. The Nifty's support levels are expected to be ,5380-5,450 and resistance at 5,750-levels.
Further, the industrial production data to be announced on Monday will continue to be tepid. But with such data in the US and China improving, the poor Index of Industrial Productivity numbers could have a sentimental impact on the market, analysts said.
"The sanctity of these numbers is being questioned. In isolation, these numbers might not mean much. For now, the markets are looking at export numbers and its impact on trends in the overall inflows," said Sachidanand Shukla, economist at Axis Capital. Trade data is expected to be released in the week ahead. The better-than-expected monsoon is expected to soften inflationary pressure in the economy. However, analysts said this had been discounted already by the markets. "Only if the core inflation numbers cross the double-digit mark will there be a visible negative effect on share prices," said Jain.
Among the big names expected to announce their first quarter numbers are State Bank of India, Oil and Natural Gas Corporation and Oil India. The results numbers so far have had minimal impact on stock movements, as the markets have largely reacted to macro economic developments.
Similarly, the markets are also not likely to react to last week's US Federal Reserve's announcement on starting to taper off the $85-billion bond buying programme. "The market has already discounted the US Fed statements. It is in line with market expectations. Incrementally, it will be the macro events which will play out in the market," said Sarabjit Kaur Nangra, head of research at Angel Broking.
THE WEEK AHEAD
Monday
- SBI results
- ONGC results
- CPI, IIP data
- Oil India results
- IOC results
- Tata Steel results
- WPI data
- SAIL results
Source: BSE