Markets likely to go up this week

Banking and finance stocks are expected to lead the rally

With the monsoon season just a month away, agro-based stocks are also expected to go up. Fertilisers and agro-chemical stocks are also suggested for buying ahead of their seasonal demand picking up

The BSE Sensex capped its second week of declines amid losses in global stock markets before key US jobs data that may indicate whether world's biggest economy could withstand higher borrowing costs. Asian markets traded mostly in negative territory ahead of the crucial US non-farm payrolls data for the month of April.

The US non-farm payrolls data will be a major factor when the US Fed decides on interest rate in June. The Indian stocks were also marked down due to weak on-going corporate number season as many of the companies that came out with their quarterly numbers either fell short of market expectations or presented lower earnings when compared with previous quarters.

Sustained off-loading by foreign institutional investors was yet another factor that accelerated the descent in individual stocks as well as most of the stock market indices. The Bank of Japan that came out with status quo in regard to interest rate and failed to satisfy Japanese investors' expectations of a stimulus package even as it painted a grim outlook over its GDP growth for the next couple of years, triggered a fierce war between two major currencies, the Japanese Yen and the US dollar, in which Yen turned out to be a winner and the dollar, a loser.

The weakened dollar was also an excuse for the US-based institutional investors to have off-loaded foreign stocks in respective stock bourses. Indian bourses were amongst the ones to have faced such selling from the FIIs. The BSE Sensex that had closed the previous week at 25607, opened the week under review a bit lower at 25565 and managed to climb up to a high of 25706 on Tuesday.

But the news emanating from Asian and other leading global stock bourses turning vastly negative, the markets here slid to a low of 25061 by Wednesday. However, after a brief and minor rally that saved the market gauge from piercing the 25K mark, the markets once again surrendered to increasing off-loading by bull operators that rendered the Sensex vulnerable to fresh attack by the bear operators.

The Sensex on Friday, therefore, tanked to the week's lowest of 25058. This, however, was a level that was just close to the previous low of 25061 reached a couple of days ago, that attracted many long-term investors fall for value-buying, resulting in the Sensex paring early losses on Friday and thereby close at 25229, with a weekly loss of 378 points.

The on-going Budget session of the Parliament last week passed the Finance Bill (Union Budget) and also cleared a much-awaited Insolvency code but these failed to lift stock prices much as the passage of these two was expected and therefore, already factored in market prices. On the contrary, eruption of Agusta Westland Helicopter deal controversy appeared to have ruined the prospects of getting support for clearing the most crucial GST Bill, from the main opposition party, the Congress, in the upper house.

But many optimists in the market still believe that the GST Bill will get cleared in the new week and the Congress is also likely to extend its support. However, the current session of the Parliament is scheduled to be over this week and the fate of the most crucial bill will be known very soon.

In case, the GST Bill is cleared in this week itself, then the markets will likely to stop going further down and the last week's lowest levels in individual scrips as well as the indices, would likely perform as strong support points for prospective buyers of equities. According to the latest data as released by the US Labour Department, the US economy added fewer jobs than expected, in April.

The US non-farm payrolls rose 1,60,000, lower than the expected jobs growth of 2,02,000. The data so released prompted the US stocks gain slightly as weak job gains lowered rate hike expectations. This is expected to help the weakened dollar to firm up a bit and also aid global stocks to rise in the new week.

Indian stocks are also expected to rise. The banking and finance company shares are most likely to lead the rally as these have been battered down the most on talks of mounted up NPAs and now ready to tackle the most troubling issue with the help of the just cleared Insolvency and Bankruptcy code. With the monsoon season just a month away, agro-based stocks are also expected to go up. Fertilisers and agro-chemical stocks are also suggested for buying ahead of their seasonal demand picks up.