RBI's Monetary Policy Will Determine The Future Course

The Indian markets have traded in a narrow range for the entire week ending October 25, 2013. Both the Sensex and Nifty closed with nominal losses of nearly 1%. In this week, the Sensex touched the psychological mark of 21K, but witnessed some profit booking after that. The IT index closed the week marginally in the red. Banking, on the other hand, saw considerable gains.

A significant development that took place during the week was that the Finance Minister P Chidambaram reiterated his earlier call of curtailing the NPAs of banks, especially PSU banks. He instructed the CMDs of PSU banks to set up separate verticals on the lines of the one put in place by the SBI to speed up the process of recovery from written-off accounts. In a review meeting with the chiefs of PSU banks, the FM said that the government would stick to its earlier plan of infusing additional capital of Rs 14000 crore into these banks to satisfy the Tier I capital adequacy norm. Though a rough idea as to the amount to be infused into each of the banks has been drafted, each bank chief will be consulted separately for any additional funds needed by them.

The earnings season is well underway. The results of the cement companies have been sorely disappointing. All the cement companies have reported a dip in their net profits, which can be put down to the sluggish demand. Apart from these, companies like Ipca Laboratories, ITC and HUL have reported better numbers and are holding the markets together at this point of time.

Going forward, the markets will be waiting with bated breath for the RBI's monetary policy on October 29, 2013. The steps taken by the central bank will be a decider for the movement of the markets. Hence, volatility at the start of the week to come cannot be ruled out.