The benchmark indices, the BSE Sensex and the NSE’s Nifty, and the broader market are likely to witness volatility this week, as traders roll over derivative positions to November series. The near-month October derivatives expire on Thursday. The stock market will remain closed on Wednesday on account of Dusera.

With the US markets closing deeply in the red on Friday (Dow crashed over 200 points and Nasdaq plummeted 67 points), domestic markets will open with a negative bias.

Weak rupee

Foreign institutional investors have also slowed down buying. Concern over rupee has re-emerged. Rupee tumbled to a one-month low of 53.85 against the US dollar on Friday. The sentiment further weakened after inflation rose 7.81 per cent in September, which may restrain RBI from cutting interest rates at its October 30 Monetary Policy meeting. Besides, current account deficit, banks’ deposit growth and loan deposit ratios also do not provide room for quick rate cuts.

Morgan Stanley in a research note said that though there has been a growing clamour for rate cut, early rate cuts would raise the risk of renewed currency depreciation pressures. “We believe that the current macro environment provides little room for immediate rate cuts ...,” Morgan Stanley said adding that “rather, it warrants a delay in policy rate cuts.”

Stock-specific action, particularly in relation to the September quarter financial results, will continue to influence share price movements.

This week, L&T, HDFC, Cairn India and Bank of Baroda (Monday), Hero MotoCorp, Sterlite Industries and Lupin (Tuesday), Mahindra & Mahindra, Kotak Mahindra Bank and Asian Paints (Thursday), Hindustan Unilever, ICICI Bank, NTPC, Sesa Goa, GAIL (India), Punjab National Bank and IDFC (Friday), will unveil their September quarter results.

Clarification on GAAR

Market participants are seeking clarity on taxation policy. The Government will soon decide on the general anti-avoidance rules (GAAR), which was proposed in the Budget in March. Following upheaval, the Government had set up a committee under Parthasarathi Shome that submitted its report late last month.

The Shome panel had proposed the implementation of GAAR, which targets firms and investors routing money through tax havens, to be deferred to April 1, 2016, as against April 1, 2013.

The Finance Ministry will now have to take a call on the panel’s recommendations to postpone GAAR’s implementation by three years and do away with the retrospective tax provisions. But these would require going back to Parliament and seeking the necessary legislative amendments.

> badrinarayanan.ks@thehindu.co.in

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