It is an important week for the market, not just because of expiry but because of the slew of policy announcements expected from New Delhi and the Reserve Bank of India (RBI) which could set the tone for market expectations. So expect a heavy news flow week as we head into the June expiry on Thursday, says CNBC-TV18s managing editor Udayan Mukherjee.
Earlier expectations were that eurozone policies will hold the key for a global risk on rally, but given that expectations have been raised by the Prime Minister himself, all market participants will be looking that way to provide some kind of triggers for the index.
There may be action on the currency front as well because the rupee closed at 57 plus last week. The government and the RBI Governor all seem to be sitting up now and taking notice of how swiftly the rupee has taken out 57. So we may hear some announcement first the RBI and then may be even the FM that might provide some kind of trigger for the market, at least in the near term.
From the global space, it is increasingly appearing that we will not get a whole lot from the euro leaders, but that remains another important cue. So this week is probably policy week in terms of local and global triggers.The price action seems to suggest that the market is not expecting very big things from the euro meetings and the summits this time around. They did do a little bit along expected lines, which was to ease off the collateral norms for euro banks, but that will not help a whole lot. They are talking about a relief package or a stimulus package of about 130 billion euro, but that also did not seem to send the stocks off on a great rally. So a 1% of euro GDP stimulus package is not likely to change the complete face of what one should expect in terms of euro economic data over the next few months and quarters.
So having seen what came out of the last meeting, the market now is increasingly beginning to feel that may be the next summitwill be pretty much like the previous summits, which is a lot of talk and promise but nothing really concrete gets done in moving towards the eventual end game. So as we move towards the end of this week, markets might just begin to flatten out a little bit as they temper down their expectations from this EU summit as well.
Last week the Nifty was almost stubborn in its resilience, so we did alright in the face of all that news flow. The screen is not looking like a market which has completed its up move. The market is saying that it is unwilling to move lower, and that if events permit we it will move up. So the propensity is to climb higher and not to go down too much below that 5100 kind of level for now.
That is supported by the technicals as well because we are not seeing too much selling from the global guys, which is something that might push the market back down to those sub 5000 kind of levels. So if you are just looking at the screen, then the market remains in course to move to 5200. Whether the announcements from New Delhi, from RBI, from the EU leaders over the next five-six sessions will allow it to move towards 5300-5400 is something that the market will have to grapple with. But for now, its in no mood to go down dramatically unless there is a clear disappointment
On Friday, despite the global disappointment, our market was quite resilient. So there is almost a sense of this pullback rally from 4800 having an incomplete air about it. People believe that there is more juice on the upside and therefore they are reluctant to give up their long positions just immediately. You can construct bullish and bearish scenarios about the way going forward, but we are just talking about thenear term.
From the currency space, there has been a lot of talk about what may come in terms of corporate bonds for oil marketing companies, but the big one could be an infra dollar bond thats been talked about. There has been a lot of speculative talk doing the round, but depending on who you ask you will get a different answer on what the RBI might come out with. But generally the talk seems to be around the creation of some kind of a bond scheme.
There are some people who believe that the government might move the ceiling on corporate and government bonds quite significantly, but not everyone aggress with that expectation. There is also some expectation on buying or providing dollars to the oil companies directly, so it might be a combination of things. But at 57 plus a dollar, if the RBI does not do anything then we are probably letting the currency find its own level and that could be 60 in the near term as well.
There is an element of consternation now in the policy makers; the PM has got pretty active in this discussion as well, so I guess a package is coming. But the last couple of packages that the RBI has put out in the defense of the currency have only managed to pull it back by Rs 1-1.5. The December package did a better job of that, but eventually we have just come back to hit fresh lows again and again. So hopefully this is not one more of those packages which is designed to just pull the rupee back by Rs 1.5 a dollar but something more durable than that. I am scratching my head about what the RBI can do to durably change the course of the currency which is not fundamental in nature.
Also watch the accompanying video..