The untimely rains damaging crops is one reason markets expect the RBI to oblige with a rate cut. But the surprise rate cut on March 4 is a reason why markets feel a rate cut is a low probability.
If the RBI obliges with a cut, it will give an indication that the ball is in the government's court and the RBI is acting on the dictate of the government. The other possibility would be the RBI doesn't expect upside risk of food inflation or it doesn't expect the US to hike rates in 2015 and thus it has room for rate cut.
At the current scenario a rate hike is unlikely. The probability of the rate cut is low but a cut will be a sweet surprise for the market. The market will also keep an eye on Friday, April 10, when the government will announce its February industrial production data (IIP), February manufacturing production data and March inflation data.
Among other economic data, on Monday, April 6, HSBC India Service PMI data will be unveiled.
There could be some tension in the market over taxation of foreign investors. There are reports that a few US and European investors groups have called for the Indian government to urgently clarify its tax regime for foreigner investors. Reports suggest that it seems there have been attempts by tax officials to claw back money they say is owed on years of previously untaxed gains.
Taxing foreigner investors is a sensitive issue and can add tension and hamper the sentiments in the market if the government doesn't clarify its stance that future as well as past gains would not be taxed. If the foreigners are taxed over previous years' gains than there are estimates that foreigner funds would have to shell out as much as $8 billion.
Meanwhile, among the global events, markets will closely watch developments in Greece and the Euro-zone.
On Thursday, April 9, Greece has to repay Euro 460 million to the International Monetary Fund. Among other global data, on Wednesday, April 8, Bank of Japan will announce its interest rate decision while on Thursday, April 9, Bank of England will announce its interest rate decision and its quantitative easing.