We have HSBC India Manufacturing PMI on Monday (April reading 51.3) and on Wednesday we have both the HSBC India Services PMI (April reading 48.5) and HSBC India Composite PMI (April reading 49.5).
The key event, however, would be the RBI Credit Policy Review on Tuesday. I believe that RBI would maintain the status quo as far as repo rates are concerned and would also not temper with liquidity parameters as the over-night rates in the recent past have indicated ample liquidity in the system.
Other reasons apart, RBI may pursue with the hawkish policy also because of 60 percent probability of El Nino striking India this monsoon season which, when it struck India last time in 2009, led to an increase of some 2.5 percent in inflation parameters.
Nevertheless, the tone and language of the RBI Governor Rajan is to be keenly watched in a sense, that due to recent change in the government which has its agenda skewed towards growth, how does Rajan wish to pursue his agenda on controlling inflation as his primary priority and balance his views between his priority of controlling inflation and the newly elected governments' priority of growth.
As far as the markets are concerned, I believe they have bottomed out and we may see a fair chance of markets moving up in the week ahead. There is a huge interest within the FII community for India after Modi getting elected as the leader – India being termed now as part of "Fabulous Five" instead of being in "Fragile Five" just a month back. Second, although the budget, expected sometime in July, is a key trigger, but I believe we would keep on hearing upon reformist announcements and policies continuously especially with the 100-day agenda of Modi government.
The other key event for the week would be Thursday's meeting of ECB in which there are high expectations that Draghi would cut the interest rates as well as resort to some sort of broad based asset buying, the QE, a hint of which he has been throwing around in the recent past.
Such expectations from ECB have also increased because of the success of far right parties in the recently concluded European parliamentary elections and Draghi would like to act before the elected members of the far right parties start exerting their influence.
Other key marking moving global events are: China – Sunday: Chinese Manufacturing PMI; Tuesday: China HSBC Manufacturing PMI / U.S. - Monday: ISM Manufacturing PMI; Wednesday – ADP Nonfarm Employment Change, ISM Non-Manufacturing PMI; Friday – Nonfarm Payrolls, Unemployment Rate.
Aviral Gupta, Investment Strategist, Mynte Advisors)
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