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Market Report

Monday, 01-June-2015

NSE

  • The 30-share S&P BSE Sensex index ended at 27,848.99, up 20.55 points, or +0.07 per cent. It touched a high of 27,959.43 and a low of 27,737.58 in trade today. The 50-share Nifty index ended at 8433.40 down 0.25 point, with zero per cent change. It touched a high of 8467.15 and a low of 8405.40 in trade today.

  • Markets finished flat - so flat that one index finished in the green whilr thr other closed in the red - as caution prevailed on the bourses ahead of the RBI monetary policy review due tomorrow dragged by financials. Weakness in healthcare shares also weighed on market with Sun Pharma contributing the most to the decline on weak earnings post the acquisition of Ranbaxy.

  • Expectations are running high ahead of the RBI policy. Market participants are hopeful that the RBI would be able to slash key policy rates on stable inflation, and weak industrial output growth data, say experts. The central bank may lower rates for the third time this calendar year to spur growth and kickstart investment cycle in Asia's third largest economy, they say. RBI Governor Raghuram Rajan may reduce the benchmark rate by 25 basis points, said all the 13 market participants polled by an independent agency. A basis point is 0.01%. The benchmark repo rate is now at 7.50%.

  • Meanwhile, the Q4 GDP data released on Friday ensured that India became the world's fastest growing economy, outpacing China, with a growth of 7.5% in the March quarter and the HSBC report stated that India's manufacturing PMI increased to a four-month high of 52.6 in May from 51.3 in April, with a reading above 50 signaling expansion.

  • Definitely market would cheer a RBI rate cut. If central bank turns dovish on 2nd June and cuts rate by 25 bps or more, since inflation has remained under control and industrial output decelerated in the month of March as compared to previous month, it will give boost to markets, says Rohit Gadia of CapitalVia. While a 25bps rate cut seems to be already factored in by our market, no rate cut announcement by RBI could see the market take a serious tumble.

  • Stay light ahead of the RBI review; see trading ideas in non-event stocks like RIL, HUL, says Mitesh Thacker. We have been trading with some kind of positive bias. The market has moved up, not with extreme strength. Hence, this is something which is a gamble in the sense that if you are playing the event beforehand. My idea is that in case the event is negative and we see Bank Nifty starting getting below 18,400, then you might see the banking stocks going through some kind of strong correction. That may also pull the Nifty down. On the other hand, in case the event turns to be marginally positive, then I am preparing for 19,150-19,500 on Bank Nifty. It is difficult to say how it will shape up, he adds.

  • Reaction to RBI policy announcements would determine underlying market strength, says Ashwani Gujral. I do not care about the event. What I care about is how the market will react to the event. If the market starts going down despite a rate cut, then that would be a significant sell signal. We will go back to 8,200 level on Nifty. A good reaction could be seen on a cut in policy rate by 50 bps. If that takes the market higher, that would mean there is more upside. So the event will basically tell you how strong or weak the market is and that information will come through Tuesday's event, he adds.

NIFTY 3-Month

(Data/Charts courtesy NSEI/Yahoo!/iCharts/The Economic Times)