Mumbai: The markets are expected to be volatile due to May series expiry of futures and options (F&O), while rising political uncertainty in the US is likely to keep investors cautious. The last leg of the March quarter corporate earnings will continue to flow in and the focus on goods and services tax (GST) will remain as the government brings in more clarity ahead of 1 July implementation.
"This week markets could gyrate with rollover movements in individual sectors and stocks due to derivatives expiry. Nifty Pharma is trading at crucial supports as per monthly averages. A lot of results this week will be key to watch to establish a direction in these stocks," said Rakesh Tarway, head of research, Reliance Securities.
Companies which are expected to announce fourth quarter results in the week are Tata Motors, Sun Pharma, ITC, Tech Mahindra, Indian Oil, GAIL, Lupin, Bosch, Corporation Bank, Bank of India, Torrent Power and Balrampur Chini.
Vinod Nair, head of research, Geojit Financial Services, said revival in corporate earnings, strong reforms momentum and higher spending by the government will attract investors who were left out in the recent rally to enter at every opportunity on consolidation. "The GST Council has finalised tax rates for 80 per cent of goods under 5 per cent, 12 per cent, 18 per cent and 28 per cent brackets. The initial picture of GST rates point to an inflation neutral stance of government. The rates will also be looked from the perspective of RBI's (Reserve Bank of India) cautious stance of inflation and outlook post implementation of GST. With the rates largely falling in the inflation neutral range, this is largely to be taken positively," he added.
On the macro-economy front, gross domestic product (GDP) estimate for January-March will be released on 31 May. According to Federation of Indian Chambers of Commerce and Industry (FICCI), India's economy is set to grow by a robust 7.4 per cent in the current fiscal year. Earlier Central Statistics Office had released third quarter GDP growth estimates at 7 per cent and estimate for the full 2016-17 fiscal was put at 7.1 per cent.
Meanwhile, Indian technology and pharma stocks may stay in focus this week as well, following political turmoil at the White House after former FBI director James Comey was fired, and as the possibility of US President Donald Trump's impeachment gathered steam. Comey has agreed to testify before the Senate Intelligence Committee shortly after Memorial Day. On 17 May, former FBI director Robert Mueller was appointed special counsel to investigate Russian interference in the 2016 presidential election and any cover-up related to it by Trump or any White House officials.
Escalation of geo-political tension may also impact markets. According to a Reuters report, North Korea has successfully tested an intermediate-range ballistic missile to confirm the reliability of the late-stage guidance of the nuclear warhead, indicating further advances in the ability to hit US targets.