Markets are likely to be volatile this week. The Nifty and the Sensex, however, could end up gaining up to three per cent.
Risk free assets could see a sell off and the funds thus raised deployed to support risky assets such as equity.
Watch out for the behaviour of rupee-dollar, crude oil prices, progress of monsoon and Thursday’s F&O expiry.
Their impact on stocks will determine direction of indices and hence shape the course of markets.
Marketmen are expecting the government to announce some broad measures to tackle fiscal and current account deficit this week.
Ten year G-Secs are expected to see a rally in prices and then a sell off coupled with high volatility.
The new 10-year benchmark is likely to remain between 8.0 and 8.2 per cent levels this week.
The RBI might do an open market operation only if liquidity adjustment facility (LAF) figure exceeds Rs one lakh crore.
The rupee is expected to strengthen and breach 56 to a $ this week.
Euro Zone
Euro zone leaders or the European Council will meet on June 28 and 29 to deliberate banking union. The meeting is expected to propose integrated banking supervision at the EU level by autumn.
Also on the anvil are a single deposit guarantee scheme and an EU resolution fund for banks in crisis. The meeting is also expected to take a call on the European Stability Mechanism lending directly to banks.
The banking union envisages further integration among the 27 European Union nations.
It was set up on January 1, 2011 as three European Supervisory Authorities (ESA) for regulating banking (European Banking Authority), capital markets (European Securities and Markets Authority) and insurance and pension (European Insurance and Occupational Pensions Authority).
All the three entities are represented by national supervisors across 27 Euro Zone nations.
The Euro could surprise currency traders and breach the $ 1.2650 levels this week.
The dollar index DXY is expected to shed value and breach 82 levels this week.
The dollar index is the weighted average (geometric mean) of the US dollar’s value compared with Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and the Swiss Franc.
US 10 year-treasury is expected to be range bound and between 1.55 per cent and 1.75 per cent levels this week.
Commodity
Gold will while away time this week and is likely to stay around last week’s close of $ 1566.9 to an ounce.
Crude oil futures could stay within five dollars on either side of last week’s close of $ 79.76 dollars to a barrel.
raghavendrarao.k@thehindu.co.in