RBI policy decisions to drive market this week
The coming week will be holiday-shortened as markets will be closed April 4 on the occasion of Mahavir Jayanti and April 7 due to Good Friday. The RBI policy decisions will drive the market over the next week, according to the Reserve Bank of India. The RBI will begin its 3 day monetary policy meeting on April 3 and the outcome of the meeting on key rates and economic outlook will be announced on April 6. There are expectations that the central bank will raise its main interest rate by 25 basis points and then pause for the rest of the year. The RBI raised its key repo rate by 25 bps to 6.5 per cent during its February 2023 meeting, in line with expectations, the sixth rate hike in a row.
The coming week will be crucial as it's the beginning of the new month and there will be some important macroeconomic data that will guide the markets. Investors will be looking for S&P Global Manufacturing Purchasing Managers' Index PMI data for March to be released on April 3. Market participants are looking for the S&P Global Services PMI and S&P Global Composite PMI for March to be released on April 5. On April 7th, traders will be watching for the Foreign Exchange Reserves data to be out. Bank loan and deposit growth will be released on the same day. Auto companies would get some attention, as they will announce their monthly sales figures.
According to Srikanth Subramanian, CEO of Kotak Cherry, it's been a very busy FY 23 for global central banks, despite expectations from the RBI MPC meeting. On the one hand, they had to take an aggressive monetary policy stance by hiking interest rates and withdrawing liquidity and on the other hand, they had to take measures to protect the banking sector from the fear of contagion risk spreading across the financial system. There seems to be a very limited risk of the banking crisis for India, considering the stringent regulations around liquidity coverage ratios and capital adequacy requirements.
Subramanian said that the MPC would be taking note of all the evolving stories when they meet in April 2023. RBI has already raised repo rates by 250 bps. Despite resilient growth, there is no overheating in the economy. In the upcoming policy meeting, the RBI may take a 25 bps hike in policy rates and then take a pause. He believes that there will be more clarity on the direction of the US Fed over the next few months and that there will be more clarity about rate hikes on inflation and growth over the next few months.
Technical outlook: Rupak De, Senior Technical Analyst at LKP Securities, said Bulls remained at the helm as the benchmark Nifty closed well above the crucial resistance level of 17,250. The index moved above the recent consolidation, suggesting a rise in optimism. The momentum oscillator RSI has entered a bullish crossover. The trend is likely to be strong as long as it stays above 17,200. The next important level is 17,500 17,600, where bears will be waiting, he said.