Indian stock markets will be waiting for the most important trigger on 2 February when the Reserve Bank of India (RBI) meets to announce its sixth bi-monthly monetary policy statement. The central bank's move will be keenly watched, irrespective of whether it reduces the repo rate or leaves it unchanged, as it did at its 1 December meeting.
With most of the Sensex companies having declared their third quarter results, the focus will be on policy announcements and macroeconomic data. The government will be coming out with its advance GDP estimates for the current fiscal on 8 February, along with the data for the third quarter.
Retail inflation rose for the fifth straight month in December to 5.61 percent on account of higher food prices and was closer to the 6 percent target for January 2016 set by the apex bank, leaving little scope for reducing the repo rate.
At its fifth bi-monthly monetary policy statement issued on 1 December last year, the RBI had said the inflation target for January 2016 at 6 percent was "within reach".
After witnessing volatile trading during the week on account of global factors including the persisting fall in crude oil prices, the S&P BSE Sensex and the NSE Nifty ended the week on an upbeat note on Friday, gaining more than 1.60 percent. The Sensex closed at 24,870.69, up 401 points, or 1.64 percent, while the Nifty was up 138.90 points, or 1.87 percent to settle at 7,563.55. The surge was mainly due to a global rally in equity markets after the Bank of Japan adopted a negative interest rate policy for the first time.
On Friday, post trading hours, the Central Statistics Office (CSO) revised the economic growth rate for 2014-15 to 7.2 percent from its earlier estimate of 7.3 percent. For FY2015, the revised figure was 6.6 percent from the earlier 6.9 percent.
Shares of automobile companies will move depending on the domestic car sales data for January. The full impact of the 15 December, 2016 Supreme Court order banning registration of diesel cars with an engine capacity of 2,000 cc and above in Delhi will be reflected in the sales numbers of car makers, especially Mahindra & Mahindra and Tata Motors. The impact is likely to be less on Maruti Suzuki, Hyundai Motor and Renault India.
On Friday, auto stocks gained in line with the broad market rally, with Mahindra, Ashok Leyland, Bajaj Auto and Tata Motors gaining from 0.80 percent to 2.62 percent.
The rupee bounced back on Friday after hitting a new 29-month low on Thursday and closed at 67.79 to the US dollar.
Controversy over RBI Governor's statements
RBI governor Raghuram Rajan was in the news for apparent criticism of Modi government's new GDP formula and his subsequent clarification.
"There are problems with the way we count GDP which is why we need to be careful sometimes just talking about growth," Rajan said on Thursday at the Indira Gandhi Institute of Development Research in New Delhi, reported NDTV.
A day later, he clarified that he did not doubt the GDP numbers.
"It was not doubting anything about new GDP numbers or the way GDP is calculated. I think it's broadly correct," Rajan said while delivering the C D Deshmukh Memorial Lecture at NCAER in New Delhi on Friday, according to PTI.
Rajan's dosa example to drive home the benefit of falling inflation even when interest rates on saving bank deposits fall was also in the news, with the Twitterati interpreting it to criticise Narendra Modi or support his predecessor Dr Manmohan Singh, depending on their political persuasion.