Indian markets may be leaded by monsoon movements

Recovery in the global markets helped Indian investors pick up part of their losses, as the Sensex ended at 18,266.10 points on Friday, a mere 60 points, or 0.33%, down from the week before.

Debt markets:

With inflation continuing to be higher than estimated, all eyes are now on the central bank, which is likely to meet on June 16 to decide on the next course of action. Most experts feel the central bank will be forced to hike interest rates by at least 25-50 basis points in a gradual manner over a period of time. Fixed income investors may, therefore, be better off investing in liquid and liquid plus funds. Those with a one-year view could consider investing in FMPs, which are more tax efficient than fixed deposit.

Results of many corporates were not up to the mark and the markets punished those scrips. Stocks of SBI , Infosys and BHEL were battered after the companies announced results that were inadequate.

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Globally, too, there are a lot of concerns with the Eurozone problems surfacing again. As May comes to an end, the markets are likely to take cues from auto sales numbers. This could give an indication of consumer demand. The markets will also closely watch monsoon forecasts. A good monsoon could help push up consumer demand, which is crucial for the economy.

The stocks of many companies are down 8% to 10% in response to below-expected numbers. FIIs, too, have been net sellers in May. "The coming quarter is going to be tougher for corporates, since the cost of capital has moved up. This will result in lower margins," says Sadanand Shetty, fund manager, Taurus Mutual Fund.

Gold:

Speculation that China will increase its purchase of European bonds to ease the region's debt crisis led to lower demand for the yellow metal. In India, too, there are few buyers at high prices. However, in the short-term, uncertainty in Eurozone and Fed's action post QE2, which is likely to end in June could make investors come back to the yellow metal. This could move up gold prices marginally in the short term.

Source: [ET]