Will Market Sustain the Rally, After Good Past Week?

I think in the short term there are three things which will guide the market.

1. First, the inflation numbers and the monetary policy. One should now be prepared to face some monitory tightening. Although it was not on the cards two months ago, many analysts have discounted the same at present. Though RBI ups CRR by 50 BPS, but there is no consensus on market trading negatively due to CRR hike. Vallabh Bhansali, Chairman, Enam Financial Consultants, said the markets were not completely unaware of this. "It did not come as a complete shock. The hike was being mentioned in many circles, but the market will not like it all the same. The markets reaction to the CRR hike would be muted. The banks had a good run up in the last few sessions and this is a bit of a dampener. I see this as a continuous hawkish stance as it has come in between the policy. I am concerned about the force of inflation and the force with which the government and Reserve bank of India will both come down on it, so I would be cautious about the future." Therefore, I think that anything apart from a CRR hike may impact the market negatively.

2. Second, the actual earnings figures going ahead; so far we have not yet seen any disappointing figures.

3. Third, the monsoon forecast. The India Meteorological Department has stated that the rainfall all over the country would be 99 per cent of the long period average. This will not only help the market to revive its sentiments but will also help the government since a major chunk of the inflation has roots in the perceived shortage of farm output.

Overall, any bad news is not expected at least from the domestic front and this should keep the market in a positive territory. And if things are well-placed in the global markets too, the recent upward movement in the market may carry its momentum in the coming week too.