RBI policy next breakout trigger

In a highly volatile action-packed week, the broader Nifty clocked 1.05% gains closing at 10893 with buying spree in the heavyweights. However, the mid and small cap indices closed marginally lower.Among the sectors Media (+5.84%) and Information Technology (+4.56%) lead from the front with Zee rising 11.63% post losing 27% in the last week. Tata Consultancy Services (TCS) gained 6% and Wipro hit a new high by gaining 5%. The auto sector also gained 2.20%. Among the losers Metal melted 1.47% with Vedanta slumping 17% after the news of related party transaction worth $200mn for buying Anglo American shares. Bank Nifty also closed flattish.

After a long time, the foreign institutional investors (FII) saw a comeback as they bought equities worth Rs 4,313 crore. The domestic institutional investors (DII) sold shares of Rs 965 crore.In the last week highlights, the US Fed kept interest rate unchanged and signalled a stark dovish turn in reducing its balance sheet which propelled a strong rally in the US markets.

DHFL lost whopping 47% on the accusation of the primary promoters siphoning off more than Rs 3,1000 crore of public money through secured and unsecured loans and advances to shell companies, round tripping, tax avoidance and insider trading. YES Bank lost 15.50% as one of the senior group leaders resigned from the company. Axis Bank hit fresh high gaining 7.30% post strong Q3 results. Auto major Maruti gained 6.75% on better January vehicle sales.

In the Interim Budget, the government attempted to fulfil populist demands before the general elections with the cost of such populist schemes was much lower than feared. The two major announcements in the Budget were direct annual cash transfer of Rs 75,000 crore per year to the rural population and increase in tax exemption for income up to Rs 5 lakh for individual taxpayers. This will cost the government another Rs 18,500 crore. FY19 revised estimate and FY20 budgeted estimate of headline fiscal deficit of 3.4% of GDP are within the desirable limits.

This week the key events to look for includes, Fed chairman Jerome Powell's speech on Wednesday. The Bank of England and Reserve Bank of India (RBI) will announce their monetary policy on Thursday. In the ongoing corporate earnings season Divi's Lab, Jindal Steel, Coal India, Exide, HPCL, Tech Mahindra, Cipla, Lupin, Grasim, Tata Motors, M&M etc. will announce their Q3'19 results.

The 50-share Nifty started the week with a weak and cautious note on subdued results outcome and touched low of 10583. The sentiment improved post the US Fed outcome and touched high point of 10983 after the Interim Budget on Friday. For the week, the outcome of RBI policy will set the tone for the markets with high hopes of a rate cut. Stock specific result based action can be seen with NBFCs, Banking, Consumer and Pharma sectors in focus during the week.

Technically on weekly charts, Nifty formed a bullish candle but it had multiple failed attempts to cross the important hurdle of 10985. Only a decisive crossover can trigger a fresh leg of the rally towards 11080-11176 levels with supports at 10820-10760-10580.