Markets could surprise the street with a two to three per cent upside this week. This is, however, contrary to the general consensus of a range-bound movement on the charts.
Progress on the monsoon front, last set of quarterly numbers and IIP data will influence equity prices.
Marketmen seem to have already prepared themselves for a weak industrial production number.
The Government is showing signs of fiscal consolidation after fixing the reserve price for telecom spectrum. This is likely to support the bond markets. The yields on 10-year G-Sec are expected to remain between 8.20 per cent and 8.30 per cent.
The rupee is expected to appreciate against the US dollar. There is a strong likelihood of the rupee breaching 55 levels to a dollar and touching 54.50.
FII flows could increase this week with the risk-on sentiment prevalent globally.
Software glitches haunted the stock markets yet again. Knight Capital, a retail market maker, on the NYSE lost $ 440 million, impacting its capital base severely. A glitch while installing trading software resulted in Knight sending numerous erroneous orders in NYSE-listed securities into the market last week.
Though the software has been removed, the Securities and Exchange Commission (SEC) has initiated a review of events that led to this issue.
The SEC Chairman Mary Schapiro said: “Existing rules make it clear that when broker-dealers with access to our markets use computers to trade, trade fast, or trade frequently, they must check those systems to ensure they are operating properly. And, naturally, we will consider whether such compliance measures were followed in this case.”
With this, regulators worldwide are expected to become extra cautious on algorithmic and high frequency trading given the need to reduce technological errors and limit their impact.
Remote possibility of another round of quantitative easing is expected to harden the US 10-year benchmark treasuries to about 1.75 per cent.
The euro is likely to strengthen and breach US$ 1.2550.
Political tension in West Asia is likely to increase the risk premium on crude prices. Nymex crude futures is likely to breach $95 a barrel.
Gold is anticipated to rise two to three per cent over last week’s close of $1609.3 an ounce.