Markets are expected to remain volatile this week. Crude oil price fluctuations, rupee movements, corporate earnings and the Federal Reserve's decision on interest rate will drive Indian markets. Share markets will have only three trading days this week with Monday and Wednesday being holidays due to general elections in Mumbai and Maharashtra Day, respectively.
According to Jimeet Modi, founder and CEO, SAMCO Securities & StockNote, markets are expected to move either 2-3% up or down from current levels.
"Open interest is consistently reducing in the futures market given the already elevated levels and uncertainty over the election outcome. Status quo is expected to be maintained going forward. At the sectoral level, FMCG, capital goods and healthcare are largely expected to move sideways with very little volatility. Realty, mid-caps, auto, metal, power and small-caps are in a corrective mode with further downward pressure going ahead," he said.
Major corporates scheduled to announce March quarter results this week are Kotak Mahindra Bank, Tata Power, Hindustan Unilever and Federal Bank among others.
Auto stocks will be in focus this week as automobile companies will declare their monthly sales for April. In March domestic automobile sales were hurt by weak consumer sentiment amid a rise in borrowing costs and increased fuel prices.
The markets will keenly observe fluctuations in crude oil prices. Brent crude has risen nearly 6% this month and could be a major headwind for Indian markets. Crude oil prices could have repercussions on the external sector (including currency), fiscal math, inflation and financial markets.
The Federal Reserve will meet this week to decide on raising rates. It is widely expected that the US central bank will not hike interest rates this time after it killed off rate-rise expectations at its March meeting. The latest Reuters poll all but puts to bed any risk of rates going up this economic cycle, given inflation remains below the Fed’s alarm threshold and unemployment is the lowest in generations.
Another important factor will be the rupee's movement against the dollar. The dollar has zipped to near two-year highs. The euro has tumbled to 22-month lows against the dollar and investors are preparing for worse, buying options to shield against a further downside. Emerging-market currencies are also in pain, with the Turkish lira and Argentine peso both sharply weaker.