It will be business as usual for the equity markets on Monday, said analysts, who expect only a knee-jerk reaction from the frontline indices, if any, to the Reserve Bank of India’s (RBI’s) move to withdraw Rs 2000 notes from circulation. The central bank’s decision was made public in post market hours on Friday.
“The RBI’s move was on expected lines. The quantum of Rs 2000 notes in circulation had dipped considerably. Since demonetisation of Rs 500 and Rs 1000 notes in 2016, a large number of people have embraced the digital payment modes. The markets are unlikely to pay much attention to the RBI’s decision to withdraw Rs 2000 note from circulation,” said A K Prabhakar, head of research at IDBI Capital.
The RBI on Friday announced the withdrawal of the Rs 2,000 currency note, citing its ‘Clean Note Policy’ that aims to remove damaged, counterfeit, or soiled notes from circulation, and lack of usage. The note, however, will remain a legal tender. They can be exchanged at 19 regional offices of the RBI. "Such an exchange or deposit facility will be available until September 30," the RBI said in a release.
That said, the support for the markets, analysts believe, is likely to come from the US Fed Chair, Jerome Powell’s comments that the US central bank could remain in a wait-and-watch mode and assess the impact of the rate hikes done thus far on inflation. The US Fed is scheduled to meet next on June 14 and 15 for reviewing its interest rate decision. That apart, the developments on the US debt ceiling front, too, will be on investor’s radar.
“Fresh data suggests that the US economy remains resilient and by a string of hawkish commentary from Federal Reserve officials. In our view, the market will continue to price out expectations of 2023 rate cut from the Fed, which should allow the USD more support in the coming months,” wrote analysts at Rabobank International in a recent note.
Meanwhile, Ajit Mishra, vice-president for technical research at Religare Broking expects the markets to remain choppy in the week ahead due to the monthly futures & options (F&O) expiry for the month of May. Performance of global markets and consistency in the foreign flows back home will remain on the participants’ radar for cues.
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“The Nifty respected the crucial support at 18,050 on Friday and its sustainability would be critical for the index to retest the 18,500-18,700 zone in the days ahead. In case of a breakdown, 17,850 zone would offer the needed cushion. Traders should limit their focus on identifying stocks from the preferred sectors like banking, financials, FMCG and auto as they’re showing resilience amid consolidation. They can also selectively look at midcap and smallcap counters,” he said.
On the earnings front, Bharat Petroleum Corporation Limited (BPCL), Ashok Leyland, Hindalco, Oil & Natural Gas Corporation (ONGC) and Grasim are scheduled to announce their respective March 2023 (Q4-FY23) numbers during the week.