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Markets likely to consolidate, RBI policy to keep traders busy

LiveMint logoLiveMint 05-06-2017 Nasrin Sultana

Mumbai: The markets are expected to consolidate further, while Reserve Bank of India’s (RBI) monetary policy review is likely to keep traders busy this week.

The market momentum may also depend on the progress of monsoon and goods and services tax (GST). On 3 June, the GST Council cleared the pending rules and states have agreed to implement GST from 1 July.

According to the India Meteorological Department (IMD), the monsoon is likely to touch the Konkan coast around 8-10 June.

Vijay Singhania, founder-director, Trade Smart Online, a leading discount brokerage firm, said, “RBI’s stance on interest rates and progress of monsoon and GST will drive market sentiments in the coming week. After disappointing GDP numbers and better-than-expected corporate earnings season, the next trigger for the market will be RBI’s interest rate stance. With the benchmark indices trading at record high, further consolidation cannot be ruled out.”

The six-member Monetary Policy Committee (MPC) headed by RBI governor Urjit Patel will meet on 6-7 June for the second bi-monthly monetary policy statement for 2017-18. The central bank is expected to hold key interest rates in its policy review on Wednesday.

In its earlier policy review, RBI held its benchmark repo rate at a six-year low of 6.25% on April 6 2017 and raised its reverse repo rate by 0.25% to 6%. “It will be a big surprise if RBI cuts rates now. Even as the scenario to cut rate is emerging, RBI will take some more time as they are also concerned about inflation and how much further the note-ban impact will continue,” added Singhania.

Other key data that will be released this week include Market Economics monthly survey on the performance of India’s services sector in May 2017 on Monday. The Nikkei Services PMI in India fell to 50.2 in April 2017 from 51.5 in March 2017.

Abnish Kumar Sudhanshu, director and research head, Amrapali Aadya Trading & Investments said, “The markets are moving gradually higher and have entered the overbought zone recently which is a sign of caution in trading at the present levels. Although the GDP data was not in line with market expectations, still the index has not reacted to the released numbers. A note of caution should be maintained.”

In terms of specific stocks, Reliance Communications Ltd (RCom) will continue to be in focus. According to a Mint report, creditors of RCom have allowed the company to postpone debt servicing payments till December after it presented a restructuring plan involving the sale of its telecom tower business and the spin-off and merger of wireless assets.

India Grid Trust, the second initial public offering in the infrastructure investment trusts (InvIT) space, will make its market debut on Tuesday. Price band of the IPO, which was open for subscription from 17-19 May, was Rs98-100 apiece. The Rs2,250 crore issue was subscribed 1.17 times and raised over Rs1,012 crore from anchor investors.

Meanwhile, global markets will closely watch UK elections, which are scheduled on 8 June.

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