Monsoon to move markets this week

Markets snapped a two-week losing streak to end higher during the week ended due to the passage of two major reform bills, amendment of India’s Double Taxation Avoidance Agreement (DTAA)  with Mauritius and the Insolvency and Bankruptcy Code Bill and exciting earnings season.

The S&P BSE Sensex and the Nifty50 closed 262 points and 82 points higher at 25,490 and 7,815 respectively. Midcap and smallcap counters were seen outperforming frontline stocks. Heightened speculative activity indicated in “monsoon season”. Macroeconomic data has been on weaker side recently with PMI for most of the major econo-mies at 50, low Eurozone GDP, weak India IIP at 0.1 per cent  and retail inflation inching higher to 5.4 per cent.

This remains a concern for rate sensitive sectors in medium term and has also dimmed possibility of rate cut by RBI in its next meeting.

The outcome of the Assembly polls in Kerala, West Bengal, Puducherry, Tamil Nadu and Assam; and the onset of monsoon, cues from the earnings season, global markets, the dollar rate, investment pattern of FIIs and international crude oil prices will dictate market sentiment next week.

For the week ahead, chartists predict trading range of 24,850 and 26,000 for the Sensex and 7,625 and 7,975 for the Nifty. Key supports for the indices are at 25,150 and 24,850 and 7,715 and 7,620.

Overall trend indicates consolidation with range bound movement in near term. With the results season continuing to provide positive surprises in midcap and smallcap space, look for stocks with strong fundamentals.