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23 Jan 2012 11:17 AM
Domestic markets look forward to RBI’s Policy Review 
Swapnil Suvarna
 
Swapnil Suvarna expects the RBI policy review, quarterly corporate results and institutional investors to influence the market this week.

Week Rewind

Across the board buying by institutional investors and better than expected Q3 2011 earnings by index heavy-weights set the tone for domestic markets. The domestic markets ended the week 4 percent higher with the Sensex and Nifty closing at 16,739 and 5,049, respectively.

The week started off on a flat note following the S&P downgrade of nine euro-zone countries, which further escalated worries of the euro debt crisis. Domestic markets gained momentum after inflation (wholesale price index) cooled off to 7.47% in December 2011. The figure, being the lowest since December 2009, accelerated hopes of rate cuts by the RBI. Alongside, China’s better-than-expected 8.9% growth in the December quarter reinforced the uptrend.

Nonetheless, markets slipped after FM raised concerns on the fiscal deficit target and the World Bank slashed its global growth forecast. The market saw a rebound led by buoyant performance of index heavy-weights in the December 2011 quarter earnings. Reports that the International Monetary Fund (IMF) plans to raise its lending capacity by as much as $500 billion to safeguard the global economy from the euro-zone debt crisis boosted investor confidence. Moreover, successful France and Spain bond auction eased worries of debt crisis in the euro-zone and positive US economic data raised hopes of recovery in the economy.

The Week Ahead

With the general consensus being on the RBI will keep the key lending rates firm in the third quarter review of monetary policy 2011-12, scheduled for 24 January, the domestic markets are expected to remain in the positive territory. However, much will depend on the quarterly results and actions of institutional investors.

Developments in the euro-zone will be closely watched by investors as 27 members from the European Union’s (EU) are expected to meet on 23 January 2012.

Continue suggesting your clients to invest in quality equity funds and not be influenced by the prevailing negative sentiment in the market


 
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