Markets likely to surge with benefits from RBI, monsoon progress

New Delhi : After rallying six percent in last two trading weeks to a fresh seven month high, the pace of uptrend is likely to moderate the market as it consolidates towards gains.

Overall outlook of the market is positive courtesy recovery in corporate earnings and hopes of above normal monsoon expected to provide a cushion for stock prices. Brokers see the Nifty climbing to 8,500 in the short-term driven by a mix of fundamental factors as well as easy global liquidity.

Weak jobs data in the US has dimmed the prospects of a rate increase by the US Federal Reserve. Majority of economists expect the Reserve Bank of India to hold policy rates but the commentary will be closely watched.

” Monsoon will be key factor for RBI before deciding further rate cut as CPI inflation, which increased to 5.39 percent in April against 4.83 percent in March, is likely to rise further in near term due to rising food prices,” the economists said.

“Due to a number of macro events slated and its inclination towards having a better clarity on inflation trajectory, the Reserve Bank may choose to repeat its commitment towards having an accommodative policy basis its inflation expectation,” said brokerage firm Edelweiss.

The Reserve Bank, which will hold monetary policy meeting on June 7, had already reduced repo rate by 150 basis points since June 2015 to five-year low of 6.5 percent.

The India Meteorological Department (IMD) in its second stage report has largely kept its forecast for the monsoon unchanged from its earlier reading, saying the rainfall this year will be 106 percent of the long period average.

On Monday, US Federal Reserve chairperson Janet Yellen will speak before the World Affairs Council of Philadelphia, where she is likely to talk on global conditions amid growing concern about the Brexit. (ANI)