Domestic markets are expected open on a flat note on Tuesday, amid mixed global cues. SGX Nifty is ruling at 18710 against Nifty futures closing of 18,696.95. According to analysts, since result season is over, the focus now shifts to the upcoming RBI monetary policy, other macro numbers and monsoon progress.
RBI to remain soft
Deepak Agrawal, CIO – Debt, Kotak Mahindra Asset Management Company, said at present, India is in a Goldilocks situation with strong GDP data and a cool-off in inflation. The forthcoming decision of the Monetary Policy Committee (MPC) transcends the usual deliberations of interest rate hikes or pauses. Instead, it hinges on whether the MPC will pivot towards a “neutral” stance or persist with the current stance of “withdrawal of accommodation.”
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“Considering the prevailing ambiguity surrounding the future path of the Federal Reserve’s rates in the coming months, our perspective leads us to anticipate a dovish message from the MPC, implying that the Reserve Bank of India has concluded its tightening measures, all while maintaining the existing monetary policy stance,” he added.
Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, the Nifty index is currently experiencing a sideways trend, indicating a lack of clear direction in its price movement. This is accompanied by low trading volumes, suggesting a relatively lower level of market participation and activity.
Most equities in the Asia-Pacific region are trading flat but in a positive zone. As the US stocks ended weak on Monday, analysts expect profit-taking to emerge. Foreign portfolio investors too have turned sellers in Indian equities in the last few days.
Monsoon and inflation worries
Analysts said that little progress in monsoon activity may hurt sentiment for domestic markets.
According to Kotak Institutional Equities, risks to inflation estimates remain skewed to the upside due to the possibility of weak monsoons. Short-cycle crops such as vegetables will likely see the most volatility if the monsoon is weak. Buffer stocks of foodgrains are likely to be used if cereals and pulses are impacted, it said.
“However, with the probability of El Nino occurrence increasing, agricultural output could be impacted. For now, assuming a normal monsoon, we maintain our FY2024 CPI inflation estimate at 5.1 per cent. We continue to expect the RBI MPC to remain on pause in the upcoming June policy,” it added.
‘Buy on dips’
Choice International said India VIX was flat to positive by 0.11 per cent intraday and settled at 11.13.
“Volume profile indicates Index has a strong support around the 18450-18500 zone. Coming to the OI Data, on the call side, the highest OI observed at 18600 followed by 18700 strike prices while on the put side, the highest OI is at 18500 strike price.”
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On the other hand, Bank Nifty has support at 43800-43900 while resistance is placed at 44300-44500 levels.
“Despite the sideways trend, the overall undertone of the market remains bullish. This suggests that the prevailing sentiment favors buying opportunities on dips or temporary price declines. Investors are advised to adopt a “buy on dip” approach, indicating a strategy of purchasing the Nifty index when it experiences short-term pullbacks,” Kunal Shah added.