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Niveza Review: RBI Policy and Government Initiatives to Strengthen

Indian stock markets saw best monthly advance in the month as foreign institutional investors were seen on buying spree as government pledged to cut the fiscal deficit and on speculation that lower interest rates would help kick start growth. Recently, the Union Cabinet has approved the national capital goods policy to spur the capital goods sector. The government believes that the implementation of the capital goods policy is critical and would give much needed help to give a boost to the sector and the 'Make in India' initiative. Government's latest move of slashing the retail savings rate has strengthened the possibility of a rate cut by the RBI next month in the policy meeting scheduled on 5th April.

Global markets strengthened during the week on the back of sustained recovery in crude prices along with willingness of major central bankers to support global growth. Markets are pricing that U.S. Federal Reserve would boost borrowing costs in the June meeting after policy makers rightly refrained from raising rates this month after a rocky start to the year clouded the economic outlook. The euro area economy showed signs of strengthening in March as factory and services activity in the 19-nation currency bloc unexpectedly rose this month. The European Central Bank announced new stimulus measures this month, including corporate-bond purchases and long-term loans to banks as part of its bid to lift inflation in the currency zone.

The trend in global markets, investment by foreign portfolio investors (FPIs), the movement of rupee against the dollar, and crude oil price movement will dictate trend of the market in the absence of any domestic macro economic data. It was a holiday shortened week and we saw thin trading in the Indian market. However, some actions were seen in the domestic market as international market was firm and fresh buying was generated on some positive triggers. CRB closed up for the fourth week in a row on upside in crude, base metals and in some agri commodities. Upside in the greenback capped the upside of CRB to some extent.

Gold can trade in the range of 28200-29800 levels while silver can move in the range of 36000-39500 levels in the near term. Crude oil may trade on a strong path amid expectation of production freeze by Russia and Venezuela but profit booking at higher levels cannot be denied. Overall Crude oil can move in the range of 2600-2900 levels in MCX. Recently, signs of a revival in China's housing market and decline in LME warehouse inventories supported the base metals prices.

Stocks to watch: ICICI is on the upside while Crompton Greaves is on the downside.

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