Rates, rupee and rains to guide equity investors sentiments

​Mumbai: The Reserve Bank of India's (RBI) second monetary policy review for 2018-19, combined with the direction of foreign fund flows and global crude oil prices are expected to set the course for the key equity indices in the coming week.

Market participants will follow the monsoon's progress and the rupee's movement against the US dollar for further cues, analysts opined.

"With the earnings season almost coming to an end, the markets next week would look forward to the RBIs monetary policy," Devendra Nevgi, Founder and Principal Partner, Delta Global Partners, told IANS.

The Monetary Policy Committee (MPC) of the RBI is slated to meet from June 4 to 6 for the second bi-monthly monetary policy statement for 2018-19. In its last review, the country's central bank had maintained the status quo on its key short-term lending rate at 6 per cent, along with its "neutral" stance.

"Given the higher GDP growth rate released last week, the chances of a policy rate hike has risen, though not assured, as RBI would take a wait-and-watch approach," Nevgi said.

"A rate hike, if it comes accompanied by hawkish policy language, would hit the market sentiment, especially the banks and the NBFCs." According to SMC Investments and Advisors' Chairman and Managing Director D.K. Aggarwal: "Now markets across the globe are closely watching each development regarding US trade policy, Italy 's politics and the dynamics unfolding in the global crude market."

The National Stock Exchange's (NSE) 50-share "Nifty is expected to move in the range of 10,500-10,900 levels and Bank Nifty is expected to trade between 26,300-27,200 levels", he added.

Besides, fluctuations in global crude oil prices, along with the movement of Indian rupee against the US dollar and the composite PMI data will also affect investor sentiments. On a weekly basis, the rupee strengthened by 72 paise to close at 67.06 against the US dollar from its previous week's close of 67.78 per greenback. In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors (FIIs) sold scrips worth Rs 2,707.41 crore during the last trade week.

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 2,756.63 crore, or $405.08 million, during the week ended June 1. As per the technical charts, the underlying trend of NSE Nifty50 remains bullish. "Technically, the Nifty seems to have taken a breather after two sessions of gains," said Deepak Jasani, Head of Retail Research for HDFC Securities.

"With the underlying trend remaining up, the bulls seem to have an upper hand for the coming week. Further upsides are likely once the immediate resistances of 10,765 points are taken out. Crucial supports to watch for any weakness are at 10,620 points level." Last week, both the key Indian equity indices -- S&P Bombay Stock Exchange (BSE) Sensex and NSE Nifty50 -- edged higher on the back of a healthy improvement in the country's GDP growth rate, along with predictions of a normal monsoon and easing crude oil prices.

Consequently, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 302.39 points or 0.87 per cent to 35,227.26 points. Similarly, the wider Nifty50 of the NSE closed the week's trade at 10,696.20 points -- up 91.05 points or 0.86 per cent -- from its previous close.