MUMBAI: The market direction will be influenced by the MPC decision on interest rates on June 8 at the conclusion of the two-day meeting. While Nifty supports are at 16500 and 16300, resistances kick in at 16700, 16900 and 17000. Nifty closed at 16584.3.
However, the 12-share Bank Nifty will be in focus, given the impending policy decision. Markets have priced in another 25-40 bps hike in the repo rate, but the governor’s commentary will be keenly watched. Traders have priced in a range of 34650 - 36350 on the Bank Nifty, which closed at 35275 on Friday. RBI hiked the repo rate by 40 bps last month in an off turn meeting to tame retail price inflation which hit 7.79% in April.
“.Central banks’ (RBI and US Fed) thoughts on growth and inflation will be an important determinant of market trend,” said Vinod Nair , research head of Geojit Financial Services. “If the central banks decide on a stringent policy tightening, the market mood can swing bearish.” The Fed meets on June 14-15.
“We may have seen the peak of inflation for now but we may not have seen the end of it yet. And failure to bring down inflation even after the central bank reaches the neutral rate has the possibility of destabilizing the economy,” said Churchil Bhatt, Executive Vice President & Debt Investments, Kotak Mahindra Life Insurance Company. “Hence, failure to contain the inflation genie should scare the markets more than the policy maker’s fight against it. We expect the MPC to deliver a no-brainer policy rate hike of 25-40 (basis points) bps in June.”
FIIs have sold shares worth $7.7bn so far this fiscal year (Apr-June 2). In FY22 , they sold shares worth $18.46bn. The selling started in earnest from October last year, after the Nifty hit a high of 18604.45. From then it has fallen 11% to 16584.3.