Outcome of events to dictate trend in markets

Mumbai, Apr 22: Among a host of events scheduled in the forthcoming week, which can swing the markets either ways, the first and the most significant is the Reserve Bank of India's (RBI) monetary policy.

A section of market pundits are of the view that the central bank is expected to hold interest rates steady at its policy review on April 24, as the Union Finance Minister P Chidambaram had earlier said that the arrival of wheat imports this week, would moderate inflation. He had added that he expected it to fall back to 5.74 per cent this week.

However, some market analysts say that tightening is not over yet and the government may decide to take steps to curb capital inflows through external commercial borrowings (ECBs) that have been driving up the rupee.

On Tuesday, the apex bank will also set out its forecasts for the year, including inflation and growth.

Prior to this, the RBI had already raised the reserve requirement for banks three times from December last year and raised its main lending rate five times since early-June last year in its efforts to curb credit growth and the consequent inflation.

Price rise had been a cause of concern for quite a while now. In spite of taking several measures to rein in prices, the government has not been able to bring it down. The wholesale price index (WPI) rose 6.09 per cent in the 12 months to April 7 this year, higher than previous week's increase of 5.74 per cent, official data released on Friday revealed.

The annual rate has recently moderated to below 6 per cent, after hitting 6.69 per cent on January 27 this year, its highest in more than two years. The RBI was then prompted to tighten policy and the government cut duties on a range of items to rein in prices, analysts pointed out.

Also, acute volatility is expected ahead on the expiry of the April 2007 derivatives contracts on Thursday, experts cautioned.

Besides, a lot will also depend on how the global markets pan out, market pundits observed. Over the past few months, local bourses have been tracking global cues almost with religious fervour. Any sharp correction will lead to a fall here as well, they explained.

Also, index heavyweight Reliance Industries Limited (RIL) will announce its fourth-quaterly results on Thursday, while pharma major Ranbaxy Laboratories will declare its earnings next day. Small car manufacturer Maruti Udyog will declare their results on Tuesday.

It is pertinent to note here that in the past two weeks, stronger than expected results were declard by Satyam and Wipro. Information technology (IT) bellwether Infosys had virtually changed the direction of the markets, ensuring that they settle in the green, analysts noted.

Meanwhile, crude oil rose above US 66 dollars a barrel, supported by concerns that week-end elections in Nigeria increased the risk to supply from the world's eighth-largest exporter. Any sharp rise from here will dampen sentiment, analysts added.

UNI