India Market/Stocks Outlook for the week (18-22.06.2012)

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RUPEE DESK: India Stocks Outlook for the week (18-22.06.2012)

 

In the coming week, the trend in domestic equities will be set by the outcome of re-elections in Greece, Reserve Bank of India's mid-quarter monetary policy review, developments at the Group of 20 nations' summit, and US Federal Open Market Committee meet. Greece re-elections, which will be held over the weekend, and the RBI's policy, due on Monday, are likely to set the tone for stocks in rest of the week. The RBI is widely expected to cut the repo rate, or the rate at which it lends to banks, by 25 basis points to 7.75%.

In spite of India's high inflation rates, the central bank may announce further monetary easing due to persistent weakness in industrial output growth. India's industrial production grew by merely 0.1% in April after contracting 3.2% a month ago. The headline inflation rate, based on the Wholesale Price Index, rose to 7.55% in May from 7.23% in April. That core inflation below the 5% mark could also give some comfort to the RBI to take monetary easing steps in the backdrop of deteriorating economic growth. Apart from the RBI policy, Greece elections will be eyed to see if Syriza's anti-austerity party comes to power.

Besides RBI and Greece, investors also will take cues from the G-20 summit, on Monday and Tuesday, where leaders will discuss ways to boost global growth, create employment, and tackle the eurozone debt crisis. Markets will also track the US FOMC meet on Tuesday and Wednesday as weak economic data from the US, including May retail sales and producer price index, has raised expectation for further monetary easing. However, a positive outcome in Greece coupled with monetary easing by the RBI could take the index above the key 5200 mark. Broadly, however, the index is seen trading in a range of 5000-5200 next week.

Yesterday Nifty ended at 5139.05, up 84.30 points, or 1.7%, from Thursday, and the 30-stock Sensex closed at 16949.83, up 271.95 points, or 1.6%. interest-sensitive sectors such as banking, real estate, capital goods, infrastructure, and automobile will take cues from the RBI's policy action next week. While a higher-than-expected rate cut from the RBI could boost these sectors, the gains may be short-lived as a 25-basis-point repo rate cut is already factored into the stocks.

By RUPEE DESK

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