JOIN USStock market gains are expected to continue in the near term following the government's kick- starting economic reforms by allowing foreign investments in the retail and aviation sectors, experts said.
The Reserve Bank's monetary policy review on Monday, however, will set the investor tone in the truncated week ahead, they said. The stock markets would remain closed on Wednesday on account of Ganesh Chaturthi.
"Investors will now focus on RBI's monetary policy and the government's reforms measures that were announced after the markets closed on Friday. Valuations are in a fair zone but liquidity support may keep the market momentum going in the near-term," Sanjeev Zarbade, VP (Private Client Group Research), Kotak Securities said.
In big ticket reform measures, the Cabinet Committee on Political Affairs on Thursday decided to hike diesel prices and put a cap on supply of subsidised LPG cylinders. On Friday, the Cabinet and CCEA cleared FDI in multi-brand retailing and aviation as well as disinvestment in four PSUs.
"Market will definitely see a positive opening on Monday in a reaction to reforms announcement. At the same time, rate cut hopes have diminished since inflation is topped at 7.55 per cent and is likely to rise further due to rise in diesel prices," Kishor Ostwal, CMD, CNI Research said.
On expectations from the RBI policy meet, Dhananjay Sinha, Economist and Strategist, Emkay Global Financial Services said: "Core inflation is broadly tracked by the RBI in policy making decisions. We believe RBI is unlikely to announce a rate cut on September 17." Overall inflation rose to 7.55 per cent in August and may further escalate next month as a result of the recent diesel price hike.
The high inflationary expectations may prevent the Reserve Bank from cutting interest rates in its mid-quarterly review of the monetary policy scheduled on Monday despite India Inc's demand for rate cut to boost growth.
Meanwhile, Prime Minister Manmohan Singh on Saturday said it will take "courage and some risks" to break the policy logjam and strongly favoured higher FDI an FII inflows.
In his opening remarks at the full Planning Commission meeting for approving the 12th Plan document, Singh spoke of three economic scenarios of "strong inclusive growth", "insufficient action" and "policy logjam" and said the country needed close to USD 1 trillion investment for infrastructure development during 2012-17.