Domestic stock markets are likely to open weak on Monday following the Reserve Bank of India’s (RBI’s) decision to increase repo and reverse repo rates. Markets experts said interest rate-sensitive sectors like auto, banks and real estate would be keenly watched. But, they added, the fall would be a short-term phenomenon and fresh buying would emerge at lower levels.
In over-the-counter (OTC) trade in Singapore, the Nifty index futures fell 74 points to close at 5,195 on Friday after RBI raised the repo and reverse repo rates by 25 basis points each.
The market is likely to remain highly volatile during the coming week, a truncated one due to a holiday on Wednesday on account of Ram Navmi. Besides, the expiry of March series derivatives contracts and some likely selling by institutions (to mobilise funds for redemption needs) could render the market quite listless for a better part of the week.
“Markets may remain weak due to the RBI move, but will improve during the second half of the week. There will not be a big fall in the Nifty index. Overall, the markets may remain strong due to the beginning of results season,” said D D Sharma, senior vice president of research at Mumbai based Anand Rathi Securities.
The benchmark equity indices — Sensex of the Bombay Stock Exchange and the S&P CNX Nifty of the National Stock Exchange (NSE) — gained close to 2.5 per cent last week. Fairly-encouraging advance tax figures from top-notch companies, Standard & Poor’s decision to lift the outlook on India to ‘stable’ from ‘negative’ and consistent buying by foreign institutional investors lifted the market last week to its best close in two months.
“I think there might be a knee-jerk reaction on Monday, but it will be a short-term phenomenon. Even when Chinese and Australian central banks decided to tighten the monetary policy, their markets did not fell,” said Sailav Kaji, director (institutional equities), Fiduciary Euromax.
In a note to clients, brokerage house ICICI Direct said, “Volatility may be seen during the intra-day movement next week. The Nifty is likely to remain under the 5,300-mark, with support seen at around the 5,200-level.”
Global factors will continue to affect the market’s direction. But, the impact is not likely to be much pronounced, as investors will most probably be looking for cues at the domestic front. Action in the F&O segment ahead of March series expiry will have a strong bearing on the cash market. Overall, the market wide open interest on Friday increased by 20.96 million shares to over 223 million shares. Significant open interest addition was witnessed in stock futures and option, while index futures and options also witnessed decent open interest addition last week.
