Reserve Bank of India's monetary policy review and corporate earnings from blue-chips like ICICI Bank and Bharti Airtel will be among the key driving factors for stock markets this week, say experts.
The RBI will announce its first quarter review of monetary policy on Tuesday. It is widely anticipated that the RBI may keep policy rates and the cash reserve ratio unchanged.
"In the quarterly monetary policy review on July 30, the RBI is likely to keep repo rate and CRR unchanged. The rationale is that RBI, at this stage, is preferring indirect tools to tighten liquidity rather than outright monetary policy instruments - CRR or repo rate- which are more difficult to reverse," Edelweiss Research said in a report.
"Since these indirect measures, recently announced, appear to be working, the RBI would likely prefer a wait and watch approach this time," the report added.
The RBI last week took additional steps to tighten liquidity in a bid to curb exchange rate volatility.
"We expect a pause on repo as well as on CRR on July 30. Overall, we now expect further easing of 25-50 bps in the fiscal (against 75 bps earlier) but more so towards Q4. Increase in base rates by banks, though unlikely, is a risk now especially if these measures continue for long," Religare Institutional Research said in a report.
Stock markets are likely to remain range-bound ahead of the policy review, analysts said.
Among major earnings this week will be NTPC, Dr Reddy's Laboratories, ICICI Bank and Bharti Airtel.
"In coming sessions, 5,870 shall be crucial deciding level for Nifty in near-term, and the index is likely to witness further selling below this level," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.
Movement of rupee, trend in overseas fund investment will also be important for the domestic equity markets.
Global stocks movements will also be crucial as newsflow related to the US Federal Reserve's two-day meeting is expected, said brokers.
Meanwhile, the benchmark S&P BSE Sensex tanked a whopping 402 points last week to hit a two-week low of 19,748.19, breaking four weeks of uptrend, following disappointing Q1 results amid steps taken by RBI to stem the rupee's fall.
The rupee, however, continued its upward march for the third straight week, rising by 31 paise to close at one-month high of 59.04 during the week under review.