The market shed some gains (during the week) seen in previous two weeks with the benchmark indices losing 1.4 percent while global peers corrected 1-5 percent. Global growth concerns (especially China) and German car major Volkswagen’s scandal of emissions-test cheating in US hurt sentiment.
Overall the market was cautious in the passing week on September series expiry, after deferral of US Fed rate hike and ahead of key event – RBI policy. Analysts strongly expect the Reserve Bank of India governor Raghuram Rajan to cut repo rate by 25 basis points in monetary policy that is scheduled on September 29, citing lower CPI inflation despite disappointment over monsoon rains.
According to them, rate cut is needed right now to boost economic growth and corporate earnings. There may be a slight possibility of no rate cut due to RBI’s accommodative stance, analysts say. Chances of 50-bp rate cut is unlikely but if it happens, then the Nifty may surpass 8000-mark, they feel. The range next week could be 7800-8100, they say.
Bank of America Merrill Lynch says the RBI will likely talk hawkishly – citing monsoon and Fed risks – to signal that it will hold through December. With the likely rate cut of 25 bps next week, the brokerage expects another (final in FY16) 25 bps cut in February, with inflation meeting the RBI’s ‘under-6 percent’ January 2016 target.
Meanwhile, according to Nomura, the RBI will take a prolonged pause after this final rate cut (on September 29). It feels the RBI will adopt neutral to mildly hawkish forward guidance, as it shifts its CPI inflation goalpost to an intermediate target of 5 percent by Q1 2017. “With growth picking up, inflation stabilising at 5.0-5.5 percent, high inflation expectations and lagged effects of the rate cut, we do not expect any further monetary policy easing until end-2016,” it explains.
CPI inflation in August declined to 3.66 percent compared to 3.78 percent in July. According to Met Department, June 1-September 24 rainfall was 13 percent below normal.
Apart from RBI policy, the start of October series, August fiscal deficit, September auto sales data and regular month-end fuel price review by PSU oil marketing companies will be other key events to watch out for during the truncated week ahead. The market will shut on October 2 for Gandhi Jayanti holiday.
In stock-specific action, six stocks ( BEML , Cadila Healthcare , NCC , Marico , Bharti Infratel and TV18 Broadcast ) will be added in NSE Futures & Options segment and Adani Ports will replace NMDC in CNX Nifty on September 28.
CMC will get merged with TCS on September 30 and IDFC shares will start trading ex-bank with effect from October 1.
In a board meeting, Elder Pharma will consider proposal for sale of step down overseas subsidiaries on September 28 and Jindal Poly Films will consider raising of funds on September 29.
Disclaimer: TV18 Broadcast is owned by Reliance Group.