Monetary policy review to drive key equity indices

The central bank`s upcoming monetary policy review, combined with the direction of foreign fund flows are expected to drive investors` sentiments in the equity markets in the coming week.

Market observers opined that other factors such as the rupee`s movement against the US dollar, global crude oil prices and further economic reforms will impact investors` risk-taking appetite.

"RBI is scheduled to meet on December 6, 2017, and is expected to leave interest rates unchanged as inflation is inching up due to firming crude oil prices, increased financial market volatility and fiscal issues," D.K. Aggarwal, Chairman and Managing Director of SMC Investments & Advisors, told IANS.

"Nifty is expected to trade in the range of 10,000-10,300 points levels, whereas Bank Nifty is expected to trade between 24,900-25,600 points levels."

On technical levels, Deepak Jasani, Head - Retail Research, HDFC Securities, predicted a continued "short-term downtrend" for the Nifty after four consecutive sessions of correction.

"Nifty could now head towards the next supports of 10,050-10,094 points early next week," Jasani said.

"Further downsides are likely if these supports fail to hold. Any pullback rallies could find resistance at 10,230 points."

In its last review, the RBI had kept the key lending rate unchanged.

According to Devendra Nevgi, Founder and Principal Partner, Delta Global Partners, apart from the RBI`s rate decision, investors will also look to the language and cues on the future inflation scenario.

"Though the consensus is that RBI may not cut the repo rates, the language needs more attention if RBI turns more hawkish on sustained inflation and how the members` votes split," Nevgi told IANS.

Macro-data -- Nikkei Services PMI -- along with passenger vehicle sales will also determine the trajectory of the key indices on Monday, December 4.

Besides the macro-economic data points, volatility in the rupee`s movement against the US dollar and the direction of foreign fund flows could make investors nervous.

On the currency front, the rupee on Friday strengthened by 23 paise to close at 64.47 against the US dollar.

"Next week, the US dollar may react positively to the news that US Senate has approved the tax bill," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.

"As a result, USD/INR may inch higher towards 64.70-80 levels on spot with 64.30-35 acting as strong support. A range of 64.30 to 64.80 is expected over the near term."

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors (FIIs) offloaded stocks worth Rs 2,772.56 crore during the week ended November 27-30.

Last week, continuous outflows of funds, along with growing concerns over the country`s widening fiscal deficit as well as rising crude oil prices pulled the two key equity indices -- S&P BSE Sensex and NSE Nifty 50 -- lower.

Consequently, the barometer 30-scrip Sensex of the Bombay Stock Exchange (BSE) plunged 846.3 points, or 2.51 per cent to 32,832.94 points.

Similarly, the broader Nifty 50 of the National Stock Exchange declined by 267.9 points, or 2.58 per cent, to close at 10,121.80 points.