This week, the equity market is likely to slip further down. However, intra-day and inter-week volatility will rise owing to the impending settlement of derivatives on Thursday on the NSE.
With the presidential election over and the Finance Ministry in the control of the Prime Minister, everybody is expecting the Government to set the reform process on fast track. However, opposition from the key Government allies – Sharad Pawar and Mamta Banerjee – have once again raised doubts on whether the Prime Minister will be able to concentrate on governing.
Global cues will also remain subdued.
With quantitative easing not coming any time soon, world markets are likely to be under pressure. In anticipation of QE in some form, all the asset classes, particularly crude oil prices, across the globe witnessed a sharp rally in the last few days. But the US Fed Chairman, Mr Ben Bernanke, did not give any signals on quantitative easing (buying financial assets to inject a pre-determined quantity of money into the economy).
Besides, fresh concerns from the Euro Zone especially the Spanish banking crisis will remain a thorn. Spain is likely to tap the markets on Tuesday when it sells three- and six-month bills. It will also sell three- and five-year bonds on August 2. Spain's 10-year bond yields hit a euro-era high of 7.3 per cent on Friday.
China is another key area of concern. Recently, the Chinese premier, Mr Wen Jiabao, indicated the weakness in the Chinese economy may take some time to recover. Global fund managers are expecting that the Chinese Government will come out with the measures to promote employment and growth. Chinese economy recorded the slowest expansion in the last three years of 7.6 per cent in the quarter ended June 2012.
On the micro scale, India Inc’s financial performance so far has been a mixed bag.
Except for Infosys Technologies, there have not been major negative surprises. Reliance Industries, which came out with a drop in net profit for the third consecutive quarter, also did not surprise marketmen negatively.
This week global majors, Apple and Facebook are reporting their quarterly numbers. If they could beat market expectations, this will send positive vibrations across globe for the IT sector.
The persistent deficit in the southwest monsoon rainfall is the biggest worry for the Indian markets. The headline inflation, as measured by Whole Price Index (WPI), fell to 7.25 per cent in June from 7.55 per cent in May and retail inflation to 10.02 per cent (10.36 per cent) in June.
Though the latest inflation moderated a bit, marketmen fear deficient rainfall might once again push inflation rate up and thus the interest rate may remain at undesired levels. So far, the rainfall is deficient the extent of 22 per cent in the monsoon season.