RBI policy review to weigh on volatile markets this week

Trading this week will be truncated as well with yet another holiday falling midway, on Wednesday, May 1. It will be followed by the all-important meet of the Reserve Bank of India (RBI) on Friday, when the monetary policy for 2013-14 will be decided. Hopes for a 25 basis point cut in the repo rate are very strong and when markets were rallying on Thursday, a 50 basis point cut was expected.

Markets will be volatile this week and with the political scene turning grimmer, there could be negativity in the coming days. The controversy over the joint parliamentary committee report on the 2G scam and Coalgate would be stumbling blocks in functioning of Parliament.

The expiry of April futures last week was volatile with plenty of action in the last 45 minutes on Thursday. The indices fell in the 15 minutes before the mandatory 30 minutes of weighted average close of the day for squaring up purposes and then rose very sharply in the last 30 minutes.

This is also explained by a weak Friday, where there was no negative news for the market whatsoever.

Maruti Suzuki had excellent results for the January-March quarter and the year ended March 2013. This saw the share price of the company come close to its all-time high of Rs 1,740, reached in October 2009.

The long-awaited and expected Jet Airways-Etihad deal was sealed finally with the Abu Dhabi-based airlines buying 24-per cent stake for Rs 2,060 crore.

Gold and silver prices recovered from their lows and this saw the rupee depreciating 0.78 per cent to 54.38. Foreign institutional buyers invested Rs 3.045 crore in equities while domestic institutions sold shares worth Rs 2,106 crore.

The initial public offering from Scotts Garments closes on Monday. The company plans to raise around Rs 137 crore in the price band of Rs 130-Rs 132. The PE ratio for a garment manufacturer of between 14.52-14.75 on a fully diluted, annualised basis for October 2012 results is steep and leaves little for investors.

The RBI meet will, however, be in focus. If a 25 basis points cut is not announced, a sell-off is likely. Key levels for the Sensex will be 19,050 and 19,725 while they will be 5,750 and 5,950 on the Nifty.

(The writer is an investment analyst)

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