Market to remain rangebound ahead of F&O expiry

The Indian stock market has been inching forward touching new all time highs with the Bombay Stock Exchange (BSE) Sensex crossing 26,500 last week. This is where investors have to become cautious. There isn't any short-term trigger for the Indian market. It is currently moving in tandem with global markets. Last week a strong US market drove Indian stocks higher.

This week the Indian market is expected to take a cue from global events. The ongoing tension between Russia and Ukraine as well as development in Middle East will weigh on the market. It is also expected to remain rangebound ahead of the futures and options expiry on Thursday. Also, traders will like to square-up positions ahead of a long weekend. Indian financial markets are closed on Friday on account of Ganesh Chaturthi.

The market may slip in early trade on Monday following the remarks of US Federal Reserve chairperson Janet Yellen at a central banking conference in Jackson Hole, Wyoming. She indicated that interest rates could rise sooner than expected if the US economy performs and inflation is high. The markets have already discounted a possible rate hike in July next year. A rate hike is bad news for emerging markets. It will see an outflow of money from global markets including India to the US.
 
Back home, the Reserve Bank of India (RBI) released its Annual Report FY2014. It stated that the economy could grow in the range of 5 to 6 per cent in FY2015. High and persistent inflation remains a key risk to India's growth and to overall macroeconomic stability. Due to high inflation, especially food, the regulators as well as the government can't focus on growth. History has proven that neglecting inflation for achieving growth has its own negative fallout.

There are other factors which will impact the Indian stock market in the short to medium term. These include fiscal deficit, monsoon, oil prices and inflation. The market will also be dictated by the performance of corporate India that is trying hard to clean up its balance sheet, become lean as well as raise money for future capex. We have maintained that India is no more a short-term play. Patience will be key. Any fall is an opportunity to accumulate good quality stocks in the large as well as mid-cap space, particularly companies which do not have high leverage on their balance sheet.

Meanwhile on Friday, the government will release its June 2014 GDP data. Expectations are that GDP growth will be close to 5 per cent, at 4.96 per cent for the quarter ended June 2014, compared with 4.6 per cent in March 2014.