Markets to open gap down on jitters from Cyprus Deal - Consortium

The main indices have fallen again. A rise in the prices of vegetable and cereals pushed retail inflation to 10.91% in February. However, IIP data surprised positively with 2.4% growth in January, but it failed to cheer the indices as Nifty closed 1% lower for the week. While the headline inflation print came higher than expectations at 6.8%, the continued moderation in core inflation kept the market expectation alive that RBI would cut the repo rate by 25bps coming Tuesday. The central bank is likely to take heart from the fact that increase in WPI month-on-month was essentially driven by de-regulation of fuel prices. Further moderation in core inflation during March would enhance possibility of a rate cut on May 3rd also. Broadly speaking, the market remains in a trading range and may continue to be so in the run up to the March 19 policy meeting of the RBI. Global cues in the coming week will provide some near term direction.

Nifty has been largely range bound this week after recording ~4% rally last week. Index is facing unwinding pressure as it approaches the 5,950 mark, coinciding with 50-DMA which is acting as a steady supply point. For the day coming by Indian markets are expected to open gap down following weak global cues as Asian shares slipped on Monday after an unusual bailout proposal for Cyprus rattled investor nerves. Euro zone finance ministers want Cypriots to pay up to 9.9 % of their deposits in return for a 10 billion euro ($13.07 billion) aid package. If approved by the island's parliament on Monday, it will be the first time savers have had to foot part of the bill for a European bailout, raising fears that the model could become a precedent for future bailouts in the euro zone.

In the current week, markets are also expected to take cues from monetary policy on which the markets are divided on higher CPI inflation. A clear positive trend is likely to emerge on move past 5,950-5,970 zone. A 50% retracement for entire up move beginning from 5,664 to 5,971, projects near term support at 5,818, below which the view turns cautious.

Source : Equity Bulls

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