Stock markets across India may continue to rebound next week after strong closings across global markets on Friday.
On Monday analysts would eagerly await the results of Bank of Baroda another heavyweight PSU bank to see if asset quality stress in the sector continues. Private sector banks on the other hand may continue to see buying interest.
Stock markets were on a roller coaster ride this week with Wednesday seeing a cut of almost 230 points on the Nifty and Friday seeing a sharp recovery on the back of buying from domestic institutions.
Foreign Portfolio Investors (FPIs) on the other hand continue to sell and were it not for buying from domestic institutions the markets would have seen a sharp fall.
FPIs have constantly net sold in Indian shares for 14 straight days in a row. There are reports that they are selling to apply in IPOs of Chinese companies. In fact, there are IPOs valued at $377 billion in China according to reports in the Economic Times. This has prompted FPIs to sell Indian shares and subscribe for IPOs there since many of them are attractive.
Next week markets momentum would also be driven by earnings and inflation data. Individual stocks would react to earnings while inflation data, particularly CPI would determine which way interest rates would move in June when the RBI meets to decide on its monetary policy.
Investors are betting that there would be an interest rate cut of at least 0.25 basis points in the RBI policy given the fact that inflation has begun to fall steadily.
Volatility in the markets is likely to stay as FPIs may continue to sell and domestic institutions may continue to mop-up shares. Traders would need to be very cautious given the fact that they could lose heavily in the market volatility.