All eyes on RBI's monetary policy review

Next batch of first quarter corporate earnings, the Reserve Bank of India's (RBI) monetary policy review, progress of the monsoon rains and monetary policy review by US Federal Reserve will dictate near term trend on the bourses. Automobile and cement stocks will be focus as companies from these two sector start unveil monthly sales volume data for July 2012 from Wednesday, 1 August 2012. Investors' focus is currently on Q1 June 2012 earnings. Bank of Baroda and GAIL (India) unveil Q1 results on Monday, 30 July 2012. Jaiprakash Associates and Cipla unveil Q1 results on Tuesday, 31 July 2012. The RBI is unlikely to cut its key policy rate viz. the repo rate at first quarter review of the Monetary Policy 2012-13 on Tuesday, 31 July 2012, to guard against higher inflation as the country faces the possibility of a drought. The RBI unexpectedly left its key lending rate unchanged at its last meeting in June 2012, citing inflationary concerns. The volume of monsoon rain in India in the week ended July 25 was 20% below the long-term average, as rainfall remained deficient in northern and western parts of the country, the India Meteorological Department said on Thursday, 26 July 2012. Total rainfall so far this season is 22% below the long-period average. The monsoon's slow progress across the country has heightened concerns that output of summer-sown crops such as oilseeds, sugar and pulses may fall. A ministerial panel may soon review the drought-like situation in the country, Farm Minister Sharad Pawar said on Thursday, 26 July 2012, after a meeting with the country's food minister. Sowing of summer crops has picked up pace during the past few days. According to data released by the Ministry of Agriculture, rice was sown in 191.06 lakh hectares (lh) till Friday, 27 July 2012, sharply higher than 144.59 lh a week back. It, however, remains lower than 199.77 lh of normal area for this time of the year. Cumulative sowing of coarse cereals totaled 117.48 lh as on 27 July 2012, compared with 95.43 lh a week back. It, however, remains much lower than 160.86 lh of normal area for this time of the year. Sowing of pulses totaled 62.99 lh as on 27 July 2012, sharply higher than 40.19 lh a week back. It, however, remains lower than 79.82 lh of normal area for this time of the year. Sowing of oilseeds totaled 138.33 lh as on 27 July 2012, compared with 108.84 lh a week back. The normal oilseeds sowing area of 134.45 lh by this time of the year has already been surpassed. Sowing of cotton totaled 97.24 lh as on 27 July 2012, compared with 83.74 lh as on 20 July 2012. The normal cotton sowing area of 94.02 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.29 lh as on 27 July 2012, exceeding the normal area of 8.22 lk for the crop by this time of the year. Slowing growth in investment remains a cause for concern for India. Investment makes up 35% of India's economic activity. The manufacturing Managers' Index (PMI) for July 2012 will be out 1 August 2012. The HSBC manufacturing Purchasing Managers' Index (PMI) rose to 55 in June, a four-month high, from 54.8 in May. It has kept above the 50 mark that divides growth and contraction for more than three years. The services purchasing managers' index for July 2012 is expected to be released in early August 2012. HSBC's services purchasing managers' index, which gauges the activity of around 400 firms in India, dropped to 54.3 in June from 54.7 in May. However, it has kept above the 50 mark that signifies growth since November. The key overseas event next week is two-day policy meeting of the Federal Open Market Committee (FOMC) on US interest rates on 31 July and 1 August 2012.