Market to remain range-bound; focus on macro data, rates

Mumbai: The market is likely to remain range bound as it will be mainly driven by domestic macro data like IIP and CPI/WPI inflation, and the RBI's monetary policy outcome on Wednesday. Investors will closely watch global cues as the trade tensions between US-China escalated further, which has sparked fresh concerns over the global economic slowdown. And all eyes will be on the trade developments between the two nations in the upcoming G20 summit in Japan.

"Volatility is likely to remain high in the coming week on account of the RBI monetary policy and truncated week. Despite volatility, we do not foresee the Nifty to breach the major support area of 11,600, so any dips should be used as an incremental buying opportunity. The index is expected to resolve above its last two weeks high (12,041) and head towards our earmarked target of 12,200 in coming weeks as it is 138.2 per cent external retracement of previous decline (11,856-11,108)", said Dharmesh Shah, Head-Technical, ICICI direct.

Post a thumping victory by the BJP led NDA government, the hopes amongst participants have definitely increased for a rate cut in the upcoming policy meet.

"Enthusiasm continued to post NDA government's impressive victory on increased hopes of continued and speedy reform implementation and revival in growth. Further, a meaningful correction in the crude oil prices (fell nearly 7 per cent in the week) also boosted the sentiments. However, uncertain global cues induced volatility and restricted further upside", said Jayant Manglik, President, Religare Broking Ltd.

"We expect the markets to be range bound and news driven in the next week. With enthusiasm over BJP's majority win having subsided, the markets would track the macros and global cues. With indices likely to exhibit high volatility in the coming week, investing in quality large / mid / small caps in a phased manner would be a prudent approach," he further said.

Analysis of derivative data shows that in the last F&O settlement saw a higher rollover which clearly indicates that there is a trend that may be established in June series. The rollover for the Nifty at 71 per cent which is above its last six month average while the Bank Nifty at 83 per cent, also above six month average of 72.51 per cent, does indicate there is some confidence in the market in the coming month.

That may be attributed to multiple factors. The decline in crude, strength in rupee momentarily decisive mandate elections and so on. The important one, for now, post-event, is a decline in volatility. Going ahead, there is high expectation on the upcoming budget where the main agenda will be job creation, government spending, infrastructure, manufacturing, exports and tax reduction.

On the other hand, Q4 result started on a weak note as results from financial sector disappointed investors.

"In the near-term volatility is likely to given escalation trade war and other global concerns. RBI policy meet is key data to be watchful, consensus expects a rate cut, said Vinod Nair, Head Of Research at Geojit Financial Services.