Monsoon, fuel price decision to dictate market trend

The forthcoming week will be keenly watched by market players, not just for news on hike in fuel prices and advance tax declaration from corporate but the onset of monsoon.

If rains hit Mumbai in a couple of days, it will not only give relief to the financial capital which is reeling under hot and humid conditions, but boost stock prices, especially of the FMCG sector.

India Meteorological Department had earlier forecast that the southwest monsoon will hit the Kerala coast on May 29, four days ahead of its normal June 1 onset. Kerala has already experienced a spell of rain but the IMD was waiting for the weather system to be more fully entrenched to declare the onset.

"Traders would probably be looking at two triggers which will decide the trend for the June future & options series--one being the monsoon and second the advance tax figures. The markets should remain positive on these expectations,” said an analyst with a Mumbai-based brokerage firm.
This week, the BSE Sensex and Nifty moved in a narrow range. The 30-share Sensex ended 1.41 per cent lower at 16,316.26 while the 50-share Nifty closed 1.5 per cent down at 4946.55 from the previous week.

On Friday, surprisingly strong economic growth of 8.8 per cent in the Jan-March quarter outstripped forecasts of 8.2 per cent, indicating the country’s momentum still remained intact.

The strong data comes in at a time when the government is debating whether to raise fuel prices to tackle mounting losses of state oil firms -- a move which would also put pressure on prices. The impending decision on fuel price hike is expected to weigh on sentiment, say analysts.

"The market will remain rangebound with a negative bias next week with the decision on fuel price hike dominating sentiment. Also, the market is waiting for the onset of monsoon," said Ambareesh Baliga, head of research at Karvy Stock Broking.

Inflation in the 12 months to May 17 rose 8.1 per cent, up from 7.82 per cent a week earlier. The finance minister expressed his concern on inflation. He said there was no sign of inflation declining and more steps would be taken if needed to arrest inflation.

Meanwhile, the cooling of crude oil price provided some solace to equities across the globe. Crude oil price fell towards $125 a barrel, after having traded near $135 a week ago.

US stock index futures edged up, signalling that Wall Street may extend the previous session’s gains, with the focus on lower oil prices and economic data.