Mumbai: Stock markets are likely to see high volatility in this 'action-packed' week in view of RBI's monetary policy review and the ongoing corporate earnings, experts have said.
Progress of monsoon in the country will be another key factor that will impact investor sentiment, they said.
Besides, automobile and cement stocks will be in focus as companies from these two sectors will unveil monthly sales data from August 1, 2012.
Brokers said that fears of rising inflation, driven by possible hikes in fuel and commodity prices, have stoked worries that RBI might keep key rates unchanged at its policy meet on July 31 even as rain situation continues to be poor.
Deficient monsoon and delay in key economic reforms are also cause of concern for the markets, they said.
Sowing of pulses and coarse cereals (like maize, jowar and bajra) has been affected the most.
Agriculture Minister Sharad Pawar has called a meeting of Empowered Group of Ministers (EGom) here on Tuesday to assess the situation, while states are working on their own contingency plans.
"The coming week is likely to be volatile on account of RBI policy," Angel Broking said in a report.
According to market participants, the market may open higher on Monday after Wall Street on Friday showed sharp gains with the Dow Jones Industrial Average closing above 13,000-mark, up 1.46 percent. Tech-heavy Nasdaq Composite Index spurted 2.24 percent.
Analysts said RBI monetary policy review, progress of monsoon and next batch of corporate earnings will determine the future direction of the market.
Among corporate results, Bank of Baroda, Corporation Bank, IOB, Allahabad Bank, PTC India, Spicejet and GAIL India will unveil their Q1 results on Monday, Jaiprakash Associates and Cipla on Tuesday.
The BSE benchmark Sensex continued its south-bound journey for third straight week, tumbling another 319 points due to persistent selling pressure on concerns over deficient monsoon and delay in key economic reforms.
Increased selling by foreign funds also weighed on the market sentiment. Foreign Institutional Investors (FIIs), for the first time in the current month, sold shares worth Rs 505.38 crore in the week, including provisional data of July 27, according to stock exchanges.