Market Week Ahead: Rangebound trade likely but these 10 factors to keep investors busy
The Rs 500-crore IPO of matchmaking services provider, Matrimony.com, will open on Monday.
The market ended mildly lower in the week gone by after a rangebound trade amid North Korea tensions but the rupee hit a one-month high against the dollar due to unwinding of US currency long positions by exporters and corporates.
The rupee ended the week at 63.78 against the US dollar (the highest level since August 8), appreciating 24 paise. The US currency also corrected sharply against a basket of major rivals due to reduced expectations for another Fed rate hike this year and short-term impact of Hurricane Irma on economy. The euro hit multi-year highs against the US dollar due to likely early tapering of European Central Bank's stimulus programme.
The Nifty closed at 9,934.80, down 0.4 percent for the week due to selling in ITC, healthcare and PSU banks stocks. However, the broader markets outperformed as the Nifty Midcap hit a fresh record high and ended the week with 0.4 percent gains and the BSE Smallcap gained 1.2 percent, driven by NBFCs, FMCG and metals stocks. Overall, Nifty Metal index was the star performer, up over 3 percent on rally in global metals prices.
The consolidation is likely to continue not only for the coming week but also for around a month, at least till the September quarter earnings that will begin in second week of October, experts said.
According to them, North Korea tension is likely to keep the Nifty in a range of 9,700-10,000 and the sharp correction if it happens is likely only due to global factors.
"Factors such as macroeconomic data and trend in global markets will dictate trend on the bourses in the week ahead. Further, all eyes are on FOMC meeting scheduled later this month," Anita Gandhi, whole-time director at Arihant Capital Markets said.
Jayant Manglik, President, Retail Distribution, Religare Securities said he maintained a cautiously optimistic view and advises investors to stick to fundamentally sound stocks on dips, as long-term outlook remains bright.
Meanwhile, consistent inflow of domestic money into equity despite selling by FIIs and improving fundamentals of the economy may continue to support the market, experts feel. FIIs are cautious due to downgrade in earnings.
Domestic liquidity is king and will remain so, which is positive side of the market, Avendus Capital said, adding this liquidity bubble may burst only by major events globally.
"The sharp recovery in market is possible only when there is any kind of resolution to the North Korea problem and the earnings start to catch up," Andrew Holland, CEO of Avendus Capital said in an interview to CNBC-TV18.
Holland feels globally the risk is more towards the downside. "Risk is not only due to the North Korea tension, but we don't see Fed rate hike this year as indicated by the 10-year bond yield in US that is hovering around 2 percent. There is sharp strengthening of Euro post ECB chief Mario Draghi's comments, Japan is also concerned over rising yen, and more fundamental risks to the US etc," he reasoned.
Here are 10 factors that will keep investors busy next week:-
Globally all eyes are on North Korea's next move, after it tested a nuclear missile on September 3. Media reports in the passing week were saying there could be another missile test from the Pyongyang.
If another missile test happens, then all eyes are on action that will be taken by major countries like US, Japan, China etc.
The government (on Tuesday after market hours) will announce industrial production data for July. In June, India's factory output contracted 0.1 percent (the lowest reading since June 2013) against 2.8 percent growth in May 2017 and healthy 8 percent growth in June 2016.
The inflation data based on consumer price index (CPI) for August will also be released on Tuesday after market hours and WPI inflation will be announced during market hours on Thursday. Retail inflation had increased to 2.36 percent in July, compared with 1.46 percent in June 2017 while WPI rose to 1.88 percent (provisional) in July, from 0.9 percent in June.
Balance of trade data for August will be released on Monday. Trade deficit for July was at USD 11.5 billion.
In the coming week, the primary market will remain active as three public issues will remain open for subscription.
The Rs 500-crore initial public offering of matchmaking services provider, Matrimony.com, will open on Monday. Realty firm Capacit'e Infraprojects is coming up with a Rs 400-crore public issue on Wednesday while ICICI Lombard General Insurance Company will open its Rs 5,700-crore IPO on Friday.
"Based on the funds already raised (in primary as well as seconary markets) in August and indicative pipeline for the month of September, equity supply of USD 5 billion is expected, which can absorb a large part of liquidity available with the domestic institutions," Hemant Kanawala, Head- Equity, Kotak Life Insurance said.
However, the bright side of this fund-raising is that it leads to listing of many new businesses, which were not previously available to investors. This can hence attract entirely new set of investors, he added.
The market is expected to be in a broad range of 9,700-10,000 levels in short term, experts feel. Global factors and earnings will help the market break this range on either side.
Mazhar Mohammad (Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in) advises traders to remain cautious and initiate longs only when the Nifty firmly trades above 9,988 level and even then the upsides shall get capped around 10,088 level.
"9,850-9,900 spot levels are strong support zone and current trend is likely to continue towards 10100," Anita Gandhi of Arihant Capital Markets said.
Mohammad said, "A close below 9,800 level shall confirm weakness which should ideally threaten the lows of 9,700 going forward."
Gandhi feels the market may see short covering in every dip.
In the September option contracts, open interest building up was seen in 10,000 calls and 9,800, 9700 puts, so the probable range for next week could be 9,800-10,000 with positive bias, she said.
Among Nifty Call options, the 10,000-strike call has seen the highest open interest (OI) of 47.35 lakh shares, which will act as a crucial resistance level for the index in the September series, followed by 10,100 with 35.28 lakh contracts in open interest, and 10,200 with 31.61 lakh contracts in OI.
On put side, 9700-strike put has the highest open interest of 52.99 lakh contracts, which will act as a crucial base for the index in September series, followed by 9,900-strike put with 51.77 lakh contracts and 9,800 with 49.79 lakh contracts in open interest.
"From the option data, we have been seeing shifting of range to the upper band," Gandhi said.
Foreign institutional investors were net sellers to the tune of Rs 2,920 crore in Indian equities in the passing week. FIIs sold equities in most emerging markets.
According to Amit Gupta of ICICIdirect, FII inflows into emerging markets may pick up once the demand for other risk-off assets (bond and gold) ebbs.
However, domestic money inflow continued. Domestic institutional investors bought shares worth Rs 1,210 crore in the last five trading sessions.
"Although the valuations are not cheap but the domestic demand for investments remains high," Sanjeev Zarbade, Vice President - PCG Research, Kotak Securities said.
June quarter earnings season will end in the coming week and 269 companies (as per data available on the NSE) will announce their quarterly numbers.
There stocks will trade ex-split in the coming week. Deccan Cements' face value will reduced from Rs 10 to Rs 5 on September 11 and consequently, the stock price will be halved.
Borosil Glass Works' face value will be reduced from Rs 10 to Re 1 on September 14. Nesco will go ex-split on September 15 as its stock face value split from Rs 10 to Rs 2.
Following companies' share prices will trade ex-dividend in the week:-
Stocks in Focus
On the coming Monday, Mahindra & Mahindra, Maruti Suzuki and Tata Motors will be in focus as the GST Council was supposed to decide the quantum of cess hike in each variety of car at its meeting on September 9.
Bharti Airtel will also be in focus as sources told CNBC-TV18 that the Telecom Commission has decided to award Rs 3,100-crore contract to Bharti Airtel for connecting 4,500 villages in North Eastern states.
IL&FS Engineering share price will react to the news of contract termination. The company received letter from Paschimanhal Vidyut Vitran Nigam to terminate contract for rural electrification of Moradabad villages.
Reliance Communications will be in focus as National Company Law Tribunal will hear its plea for Aircel merger on Wednesday.
Bank of England will announce monetary policy summary and minutes of the monetary policy committee meeting on Thursday.
Consumer price Index data for August will be released on Thursday while the Federal Reserve's industrial output and retail sales for August will be announced on Friday.Japan's core machinery orders for July will be announced on Monday and industrial production data for July on Thursday. China's industrial production for August will be released on Thursday.