Financial markets will be action-packed with IIP numbers, inflation, economic survey, RBI's policy review, economic survey and the union Budget converging this week.
Volatility would be high. It is anticipated that the NSE's S&P CNX Nifty and the BSE's Sensex could vacillate eight to nine per cent – either side put together.
Last week's CRR cut might strengthen indices up in the first half though the euphoria will die soon.
Lacklustre IIP numbers and a negative surprise from inflation at seven per cent are expected to soften 10 year G-sec yields.
Yields are estimated to range between 8.16 per cent and 8.2 per cent levels until the budget.
A further cut in CRR by 25 basis points is more likely than a 25 basis point cut in the repo rate when RBI does a mid-quarter policy review on March 15.
Yields would soften to 8.05 per cent levels if this probable cut is accompanied by the fiscal deficit at 4.6 per cent of GDP and net government borrowing at Rs. 4.7 lakh crore in the budget.
Higher levels of fiscal deficit and government borrowing will take 10 –yr G-Sec yields back to 8.25 per cent levels. The rupee is likely to fluctuate between 50.6 and 48.6 to a dollar this week.
Global scenario
On the global front markets are optimistic on economic data from the US and UK (see table).
Better economic data from the US will harden 10-year US treasury yields in the two per cent and 2.2 per cent range. The euro will slightly strengthen this week and in all probability touch $1.3340 level.
Gold is expected to soften to $ 1630 to an ounce while the $104.5 a barrel levels is a crucial support for Nymex crude oil futures. If Nymex closes the week at $110 to a barrel, it could flare up oil prices worldwide.
Finally, it remains to be seen how the Eurozone reacts to the IMF reducing its share of the bailout to Greece.
According to last Friday's statement from the IMF Managing Director, Ms Christine Lagard, its executive board will vote this week on the proposal to provide €28 billion to Greece over four years.