'Impending US rate hike, economic data to flare-up volatility'

Mumbai, August 9: An impending US interest rate hike, coupled with key economic data points and the continuing logjam in parliament might flare up volatility in the upcoming weekly trade, alysts said. “Volatility is expected during the initial part of the upcoming week, as the markets will focus on the key US economic data, domestic inflation and factory output figures,” And James, co-head, technical research desk, Geojit BNP Paribas, told IANS. Major data points such as the Consumer Price Index (CPI) and Index of Industrial Production (IIP) are expected to be released on August 12, following which the Wholesale Price Index (WPI) will be released on August 14. These data points are significant as they will show the inflation trajectory and give further cues on whether the Reserve Bank of India (RBI) might go in for an unscheduled rate cut. The RBI, in its third monetary policy review on August 4, had kept the repurchase rate, or its short-term lending rate, unchanged at 7.25 percent. The RBI had informed that it will await further transmission of the earlier cuts by banks and data points. Markets are doubtful over the RBI’s ability for a future easing of the monetary policy in the hindsight that the US Fed’s decision on its own rates is coming up in September. “The US data is key in deciding whether the Fed will raise rates or not in September. The jobs data that were released late on August 7 night will also play on investors sentiments, when the markets starts on Monday,” James predicted. The US economy added 215,000 new jobs last month. In June the employment figures went up by 231,000, while during May it stood at 260,000. The data point is significant — as it shows recovery in the US economy, based on which the US Fed is likely to raise interest rates in September. With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India. According to Devendra Nevgi, chief executive of ZyFin Advisors, the real deal-breaker in the coming week might come if the government finds a way to end the impasse in parliament. (IANS)