This week, the Nifty and Sensex are likely to bounce back over last week's close. State Bank of India's results seems to have provided the impetus for reversal of an extremely oversold market.
Corporate earnings this week and what it does to the sentiment will be interesting to watch. Major results expected are Tata Power, PFC, Wockhardt, BHEL, REC, Tata Global Beverages, R-Power, ITC, NHPC, Suzlon and BPCL.
There is widespread anticipation of a fuel price hike this week after the Parliament session ends of May 22. Sectors to watch out for would be oil marketing companies, automobiles and banks.
There are three possibilities that could happen in fixed income markets.
If the new 10-yr benchmark G-Sec is introduced and the RBI continues with its open market operations (OMO), then yields are likely to soften to 8.35 per cent levels.
If both do not happen, then yields would harden to 8.60-8.65 per cent levels.
If there is no new benchmark and RBI conducts OMOs, yields are likely to remain sluggish around 8.5 per cent levels though with a slightly bullish overtone.
Rupee volatility
Expect huge volatility in the rupee this week. It could show another all-time low breaching Rs 55 to a dollar. However, it is expected to rebound and stay between Rs 53.60 and Rs 53.90 levels.
After last week's political turmoil in Greece and Moody's downgrade of Spanish banks, an interesting situation has emerged.
The PIIGS countries (Portugal, Ireland, Italy Greece and Spain) would not let the Euro zone (and hence the whole world) live in peace while the Euro zone would not let the PIIGS die.
However, there is a feeling among marketmen that there is high probability of Greece withdrawing from the Euro zone.
Expect investors to display risk aversion again and flock to US 10-yr treasuries. Yields are likely to soften from last week's 1.72 per cent levels to about 1.6 per cent levels. However, the range for this week is between 1.6 per cent and 1.8 per cent levels.
The Euro is highly oversold vis-à-vis the dollar and hence a bounce back to 1.2960 US$ levels is about to happen.
Gold will remain range bound between $1,530 and $1,615 an ounce.
Finally, Nymex crude oil futures is expected to strengthen ahead of expiry within the $ 96.5-99 to a barrel range.