This week, stock markets would likely to remain volatile as investors come to terms with unexpected increase in interest rate by the Royal Bank of India. Stock markets would likely to remain volatile as portfolios were shaken ahead of the September derivatives contract expiry, said experts.

RBI increased the short term policy repo rate to 7.5% from 7.25%. RBI said inflation had to be lowered to more tolerable ranges. The Central Bank had also eased its liquidity tightening steps partially to be able to defend a weakening rupee.

The eased liquidity tightening steps from the RBI had reversed the bullish tone of the markets. This was after the 25 basis point increase in repo rate. This had caught market participants completely off-guard according to brokers.

Jayant Manglik, President Retail Distribution of Religare Securities Ltd. said, "This week will see expiry of September month's F&O contracts (on Thursday) so volatility will tend to remain high. Meanwhile, the markets are likely to consolidate in the broad range of 5,800-6,150 and form a base for next directional move."