June inflation data, corporate results and Presidential elections are the key events this week.
CNBC-TV18's managing editor Udayan Mukherjee says, this week, the focus might well be on what the government does post the Presidential polls and whether that can galvanise some life into the stock market once again.
According to him, the market will hold a range and wait to see what the government can do immediately after the polls.
Below is the edited transcript of his comments on CNBC-TV18.
It was a quite week, just 1% down on the Nifty. We had a rally in the US markets on Friday. But thats not been picked up by Asian markets or the SGX this morning where things remain curiously quite. So, this week the focus might well be on what the government does post the Presidential polls and whether that can galvanise some life into the stock market once again.
On global markets:
I think the US markets had probably worked themselves out into a bit of a corner. They have had a relief rally from the six-day fall. Asia does not seem particularly impressed, though there is a lot of talk in the market about Chinese easing. China does not seem very impressed by the fact that the market is down about 0.5%.
If you look at Europe, there has not been too much change. The euro is still grinding around 1.22 to the dollar. But the more significant thing, which is happening in the global markets for us now, is that thecrude is beginning to strengthen once again from the low of USD 89 barrel a few weeks back. We have now gone up 15% in crude. That is not a small rally. So, we were starting to think that crude is breaking down, will go to USD 75 per barrel and settle there. But without any great rally in other global markets that asset class has moved back once again. And that is probably what is making India or Indian investors a little nervous as well and correctly so it also makes it absolutely imperative for us to see action in diesel prices. So, it is in a sense bad that crude has gone back up, but in a sense also it keeps the pressure up on the government to not take its eye off the diesel price hike.
On the Presidential polls:
Thats the key thing. This is not a big week for earnings. You have got a couple of big names like Axis Bank and Bajaj Auto. We have got a few influential midcaps like Exide, Zee, Dish TV, Crompton, but this is not a big week for earning season.
This week the market will focus on one thing, getting past the Presidential polls where no hitched are expected and then you get to Friday. Ideally, the market would like to hear some talk of an EGoM on fuel as early as Friday because the government should not be wasting too much time after the Presidential polls and just to go in for a swift resolution, whether it is Rs 3 or Rs 5 on diesel and give that to the market.
I think thats what people would be expecting. That is probably the reason why the market will hold a range and wait to see what the government can do immediately after the polls.
On the Nifty:
It is not a very big earnings week. So, I dont see where the propellant will come from. Globally also not many events are lined up over the next five days. So, global and local triggers might be a bit muted.
Also, from the net liquidity front, institutionally there is not too much movement. FIIs bought about Rs 1,800 crore in the cash market last week.But domestic institutional investors sold about Rs 2,100 crore, just negating that effect quite completely. So, net-net, institutional liquidity is not a big driver or has not been over the last five-seven sessions. One doesnt see that changing very dramatically this week. So, if you look at technicals and fundamental triggers, there are not too many, except the news flow, which can come from New Delhi, for which the market is primed.
If that comes, there is a possibility that the market gets nudged out of its range. But for now, I think we are still very resigned to the 5,200-5,400 trading range, we amble there. You will see stock specific reactions on individual stocks. But unless something changes in the environment, there is no reason for the market or the Nifty to immediately snap out of that range.
On the inflation:
We are expecting a 7.5-7.6% kind of inflation reading today. That will not nudge the needle too much. Also, food inflation will probably be much higher. That means that the consumer price number, inflation number will continue to be much higher than the RBIs comfort.
Core inflation, I dont think any major changes are expected from the last time. But I guess the market will watch to see if prior period inflation will get revised upwards sharply like it did last time or it was a one off adjustment. We are not going to see major upward revisions. But either way I dont think it moves the needle too much.
The RBI probably will stay focused on the three triggers before July 31. That is not in any particular order. What happens to the monsoons and how it progresses till the end of this month, crude starts to move after moving back 15% from its recent highs and perhaps most critically whether the government is able to deliver a diesel price hike before July 31 meeting. So, the outcome of these three events probably will determine whether the RBI has the comfort to make a cut in this meeting. I dont think todays inflationnumber is a decisive number for RBI to make up its mind.