RBI policy, macroeconomic data to dictate trend of markets

Gaurav Jain, Director at Hem Securities

"The two-day RBI's monetary policy review meet and important macroeconomic data will dictate trend on the bourses next week. Trading on the markets will resume after a gap of four-days and on Monday, the initial sentiments will be driven global clues and on-going ICICI Bank crisis. Eventually all focus will shift on RBI policy.

We will also see some stock specific action on account of rejig in the Nifty 50 index. Bajaj Finserv, Grasim Industries and Titan Company will replace Ambuja Cements, Aurobindo Pharma and Bosch in the Nifty 50 index from Monday.

The RBI's Monetary Policy Committee (MPC) will meet on April 4-5,2018 for the first bi-monthly monetary policy for 2018-2019. It is expected that RBI to keep policy rates on hold and maintain its neutral stance at the ensuing policy review meet. Though consumer inflation has come lower in the last two readings but committee may show concerns in view of the rising crude prices.

Ahead of various state elections, the government has increased the pace of infrastructure spending. It is seen that recently, National Highway Authority of India has awarded road contracts at a record pace in 2018 that may reach at the highest in at least a decade which would boost the infrastructure sector and the government ambitious Bharatmala project. Bond yield that were inching up over concerns of excess debt supply and a wider budget deficit cooled off sharply after the government decision to cut down on the next fiscal first-half borrowing plan.

In its last meeting on February 7, 2018, RBI decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6%. Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the bank rate at 6.25%.

Beside RBI policy, auto stocks will be in focus as the auto companies will start announcing monthly sales numbers for March 2018 starting from 1 April 2018.

On the domestic macro front, Markit Economics will unveil the result of a monthly survey on the performance of India's manufacturing sector in March 2018 on Monday. The Nikkei India Manufacturing Purchasing Managers' Index (PMI) fell to 52.1 in February 2018 from 52.4 in January 2018. Markit Economics will unveil the result of a monthly survey on the performance of India's services sector in March 2018 on Wednesday.

On the global front, US ADP nonfarm employment change data for March 2018 will be unveiled on Wednesday. While US nonfarm payrolls data and unemployment rate data for March will be disclosed on Friday.

Technically, we expect consolidation in the coming week within the broader range of 9900-10400 on the Nifty. Traders should prefer hedged positions instead of outright and wait for further clarity. Barring IT, almost all the sectors are showing the mixed trend and thus require extra caution in stock selection".

Source : Equity Bulls

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