India Stocks Outlook: Weak Mon ahead of RBI policy review Tue

[B. Karthick]

India Stocks Outlook: Weak Mon ahead of RBI policy review Tue
Saturday, Jul 26

Movement of domestic shares next week largely hinges on Reserve
Bank of India's quarterly review of its monetary policy for 2008-09
(Apr-Mar) Tuesday. We expect rate hike concerns to keep market subdued
Monday.
The central bank is expected to hike repo rate at least 25bps in
the the review, and also tinker with banks' cash reserve ratio as
money supply growth is above RBI's 2008-09 (Apr-Mar) target level of
16.5%-17.0%.
All momentum indicators on intra-day charts have turned negative
and this shows that there is more room for a downside.
Sensex ended at 14274.94, down 502.07 points, or 3.4%, from
Thursday.
Nifty closed at 4311.85, down 121.70 points or 2.7%.
India VIX or volatility index rose 5% from the previous session.
Investors will continue to book profits after the over 17% surge
seen during Jul 17-23. Share indices have fallen 4% in the last two
sessions.
We expects market to correct from current levels, and be around
4200 Thursday when July series expire.
Most important thing markets are looking at are government
reforms, and only if they seem likely can we hope for a turn of
events.
The banking sector is likely to takes cues from Apr-Jun earnings
of ICICI Bank and State Bank of India today, both of which are likely
to report subdued net profit growth on mark-to-market losses on
investments.
--SBI is expected to post a 5% year-on-year fall in its net profit
to 13.52 bln rupees.
--ICICI Bank may witness a 3% rise in Apr-Jun net profit.
Reliance Industries could gain on value buying after the 7% drop
yesterday.
However, we feel buying the stock only when it falls below 2,000
rupees. The stock yesterday ended at 2,147 rupees. End

B.Karthick,
Research Analyst