The stock markets started the week on a positive note. However, concerns on a slowing down in the economic growth rate and low Index of Industrial Production (IIP) number weighed heavy on the market sentiments, and they ended the week on a weaker note. Interest rate-sensitive stocks took a beating in the markets as analysts believe the Reserve Bank of India (RBI) will increase the key interest rates further in the coming mid-term monetary policy review.
The major factors to track in the short term include fuel price hike and its impact on the inflation rate, RBI's mid-term monetary policy review, and the progress of the monsoon. Analysts are also concerned about the slower-than-expected pace of growth in the developed economies once the stimulus packages and quantitative easing come to an end.
The domestic stock markets are expected to remain range-bound with significant resistance at higher levels.
These are some of the major developments that are expected to drive the markets in the short to medium terms:
Global factors
In the US, analysts are following the performance of the economy closely. There are concerns on the slowerthan-expected pace of economic growth after the end of the second phase of quantitative easing. Analysts believe the US Fed will not announce another round of quantitative easing after the end of this one. However, the Fed is expected to maintain the interest rates at a low level and track the developments before taking further actions.
In the Asian markets, the news of a sharp drop in exports in Japan hit the market sentiments. Although it was expected due to the calamity recently, there are concerns on the pace of recovery and the time it will take to get back to normalcy.
IIP data
In the month of April, industrial production grew at 4.4 percent according to the old series and 6.3 percent according to the new series. The central statistical organisation launched a new series of IIP that covers 45 percent more items than the old series.
Although the IIP number looks better according to the new series, the message is clear that industrial growth is slowing down. There are concerns on the slow growth rate in manufacturing, mining and capital goods.
Investors should remain cautious with their existing positions or new positions in these sectors.
Inflation
The food articles inflation rate has again registered a growth for the week ended May 28. The prices of animal products registered a rise and that resulted in a rise in the index of food articles. The headline inflation rate based on the Wholesale Price Index ( WPI )) is also going strong and not showing significant signs of cooling down.
Analysts feel the RBI will implement another round of monetary tightening. However, the traditional methods of monetary tightening are not yielding the expected results.
Investors should track the economic growth rate as the RBI is continuously increasing the key interest rates. They have gone up to an extent where the industrial sector is feeling the pinch.
Commodity prices
There has been a sharp correction in the commodity markets mainly on the back of weak signals from China and unwinding of speculative positions.
Investors here should track the price of crude oil closely as it is one of the most significant factors that can influence growth. The price of crude oil is already above 100 dollars per barrel and any significant upward movement from here can have a negative impact on economic growth...
The major factors to track in the short term include fuel price hike and its impact on the inflation rate, RBI's mid-term monetary policy review, and the progress of the monsoon. Analysts are also concerned about the slower-than-expected pace of growth in the developed economies once the stimulus packages and quantitative easing come to an end.
The domestic stock markets are expected to remain range-bound with significant resistance at higher levels.
These are some of the major developments that are expected to drive the markets in the short to medium terms:
Global factors
In the US, analysts are following the performance of the economy closely. There are concerns on the slowerthan-expected pace of economic growth after the end of the second phase of quantitative easing. Analysts believe the US Fed will not announce another round of quantitative easing after the end of this one. However, the Fed is expected to maintain the interest rates at a low level and track the developments before taking further actions.
In the Asian markets, the news of a sharp drop in exports in Japan hit the market sentiments. Although it was expected due to the calamity recently, there are concerns on the pace of recovery and the time it will take to get back to normalcy.
IIP data
In the month of April, industrial production grew at 4.4 percent according to the old series and 6.3 percent according to the new series. The central statistical organisation launched a new series of IIP that covers 45 percent more items than the old series.
Although the IIP number looks better according to the new series, the message is clear that industrial growth is slowing down. There are concerns on the slow growth rate in manufacturing, mining and capital goods.
Investors should remain cautious with their existing positions or new positions in these sectors.
Inflation
The food articles inflation rate has again registered a growth for the week ended May 28. The prices of animal products registered a rise and that resulted in a rise in the index of food articles. The headline inflation rate based on the Wholesale Price Index ( WPI )) is also going strong and not showing significant signs of cooling down.
Analysts feel the RBI will implement another round of monetary tightening. However, the traditional methods of monetary tightening are not yielding the expected results.
Investors should track the economic growth rate as the RBI is continuously increasing the key interest rates. They have gone up to an extent where the industrial sector is feeling the pinch.
Commodity prices
There has been a sharp correction in the commodity markets mainly on the back of weak signals from China and unwinding of speculative positions.
Investors here should track the price of crude oil closely as it is one of the most significant factors that can influence growth. The price of crude oil is already above 100 dollars per barrel and any significant upward movement from here can have a negative impact on economic growth...
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