The stock markets seem to have developed an uncanny knack of discounting negative news and moving up. The Nifty and the Sensex is likely to soften in the first two trading sessions this week. After that, these two are anticipated to bounce back and touch at least two per cent above last week’s close.
The first quarter earnings started with TTK Prestige on Sunday. Marketmen are expecting IIP data on July 12 at about two per cent.
This week, benchmark 10-yr G-Sec yields are likely to harden and stay between 8.1 and 8.2 per cent levels. There is no Open Market Pruchase by RBI this week.
Inflation
Any probability of a rate cut hinges on inflation data expected next week.
Analysts expect that inflation at eight per cent could surprise the street. If this happens, the probability of a rate cut would be reduced.
The rupee is also expected to be range-bound and within 54.60 and 56.20 levels to a $.
A sentiment to keep off risks is prevalent globally. Global markets are awaiting the outcome of the Euro Zone’s Finance Ministers’ meet. There is expectation that measures agreed upon in the EU summit of June 28-29 would be taken forward.
The measures include creation of a single banking supervisory mechanism run by the ECB.
It was also decided that the European Stability Mechanism (a corpus to ensure the region’s financial stability) would be able to directly infuse funds into European Banks.
This is likely to keep benchmark US 10- year treasury between 1.50 and 1.65 per cent levels.
The Euro is expected to depreciate against the $ this week. It could touch $ 1.2000 levels before bouncing back to $ 1.2300 levels.
IMF Concern
The IMF has expressed concern that the economic outlook on indicators such as investment, employment and manufacturing has deteriorated. “And not just in Europe or the United States. Also in key emerging markets: Brazil, China, India,” said Ms Christine Lagarde, Managing Director, IMF, in a speech in Tokyo on Friday. Ms Lagarde said that coordinated action was required to break the main chains of this crisis: weak sovereigns, weak banks, and weak growth.
The IMF chief advocated a three-step approach to tackling the crisis. The first was to restore sovereign strength by reducing deficits.
The second was financial sector reform. This included healthy financial institutions to deliver credit to economies, create growth and jobs.
She observed that progress had been made on this front with most countries agreeing to implement Basel III norms.
These norms emphasise the importance of having enough systemic liquidity and adequate risk capital buffers to withstand economic crises.
There has also been progress on spelling out details related to systemically important financial institutions and OTC derivatives markets, said Ms Lagarde.
Finally she said that a strong, sustainable and balanced growth was essential. She emphasised that growth should create jobs and be inclusive.
Commodity movement
Nymex crude futures are expected to retest $80 levels to a barrel and then bounce back to $83-84 to a barrel.
Finally, gold is likely to remain between $1,530 and $1,620 to an ounce.