Markets to focus on RBI policy

Hopes and optimism of a likely breakthrough in the passage of the GST Bill and other bills in the current Parliament session helped markets extend gains for second consecutive week.

The benchmark indices, the Sensex and the Nifty closed 259 points and 86 points higher at 26,128 and 7,943. Midcaps and smallcaps outperformed frontline stocks. Selling from FIIs was offset by buying from DIIs. Weak rupee and renewed selling in Chinese market were sentiment spoilers.

It is pertinent to observe that falling crude and commodity prices, strong forex reserves, low inflation and indications of revival in economy have made India attractive investment destination from medium to long term perspective. In the forthcoming week, focus will be on RBI policy meet, Q3 GDP data and October fiscal deficit numbers. Expect status quo on interest rates front but commentary from the central bank over the recent weakness in rupee and global trends will hold key for near term direction of market.

For the week ahead chartists predict trading range of 25,600-26,600 and 7,760-8,125. Immediate supports for the indices are at 25,850 and 25,600 and 7,855 and 7,765.

Normally investors run to buy gold when they are nervous over stock market sell off but losing value for six straight weeks has plummeted to six year lows. Analysts attribute the fall to China’s economic and stock market slump, the surging US dollar and the likely Fed rate hike in December. Most experts predict gold will go lower from current levels also. A prominent gold forecaster says prices could even plummet to $750 an ounce.