Market Week Ahead: Record high seen on landslide BJP's UP victory, Jan factory data
The later part of the truncated week may see some correction amid consolidation due to the Fed policy meeting, say experts.
After two-weeks of consolidation, the Nifty is likely to break out on the upside and surpass its earlier intraday record high of 9,119.20 on Tuesday following BJP's clean sweep in UP and Uttarakhand. Factory output growing 2.7 percent in January will also be a factor in the market spike. The market ended up 0.4 percent in the passing week on caution ahead of assembly election results in five states, especially Uttar Pradesh that gives the parliament most number of representatives.
Dalal Street took comfort from BJP's landslide victory in Uttar Pradesh with the biggest margin in 37 years. This virtually guarantees political stability at least for next seven years, experts say, adding this emphatic victory in the elections was semi-final for 2019's Lok Sabha elections.
Political stability is the most important for any country as it gives confidence to foreign investors & companies and helps the government to implement policies smoothly like GST (goods & services tax).
According to experts, however, after the initial rally, the later part of truncated week may see some correction amid consolidation due to Federal Reserve policy meeting on March 14-15 & GST Council meet on March 16. The market will remain shut on Monday for Holi holiday.
They feel this UP win could have a bearing on the presidential elections later this year and Modi wave is likely to continue in next state elections (Madhya Pradesh, Gujarat and Karnataka). They are not worried about Rajyasabha seats math (the upperhouse majority is needed for any party to clear important policies or bills) as the GST is being already cleared.
Udayan Mukherjee, Consulting Editor of CNBC-TV18, says the market may have discounted BJP victory, but the scale of victory may not have been priced in.
"Hence, it will love & celebrate this BJP's win with 200-300 points rally on the Nifty crossing its earlier record highs on Tuesday," Mukherjee says, adding Modi factor has given BJP a second win after its stellar 2014 performance in the Lok Sabha elections.
The Nifty had touched a record high of 9,119.20 and Sensex 30,024.74 on March 4, 2015.
He further says, "Beyond that we need to assess what it means for earnings and policy-making. One can expect lot of unconventional, radical out-of-the-box policies from the Modi government to tackle black money going forward."
The market had apprehensions when BJP lost elections in Bihar but a clean sweep in UP & Uttarakhand and opening account in north east with Manipur elections concluded that there are dramatic chances of BJP winning 2019's Lok Sabha elections, Udayan feels.
Dipen Mehta, Member BSE and NSE, says it is a big positive for foreign liquidity that will continue to pour in hopes of political stability for next seven years.
Vijay Singhania of Trade Smart Online says, however, concern of markets getting expensive at the current valuation is also now emerging. The S&P BSE Sensex is trading at a price-earnings multiple of nearly 22 times, which is high compared with 23 times underlying earnings reached in July 2016, which was a five-year high.
In the coming week, on the economic data front, retail and wholesale inflation for the month of February will be announced on March 14. It is an important data point as the RBI with a hawkish tone has already shifted its policy stance to neutral from accommodative. CPI inflation was at 3.17 percent and WPI at 5.25 percent in January.
Cues from GST are also expected to be keenly watched as GST Council held a meeting on March 16. In last meet on March 4-5, it cleared drafts of the central GST and integrated GST laws.
After receiving overwhelming response from investors, Radio City operator Music Broadcast is set to list shares on exchanges next week. The issue was oversubscribed 39.45 times.
On the global front, Federal Reserve policy meeting on March 14-15 will be closely watched by the market as rate hike is largely expected by experts, especially after robust February jobs data. Fed Chair Janet Yellen in her last speeches also indicated a rate hike.
Among stocks, PSU oil marketing companies will be in focus as they will revise fuel rates next week. Hence, aviation stocks will also be closely watched as aviation turbine fuel rates may be revised.
Alkem Labs may react negatively on Tuesday as it received inspection report from US FDA for Baddi facility with 3 observations. Aarey Drugs will also be in focus as it is proposed to take over API products manufacturer Forel Labs via equity swap after due diligence
Gitanjali Gems may gain strength as its subsidiary Nakshatra World filed a draft red herring prospectus with SEBI. Oil India and Marathon Nextgen will rally as the board of directors will consider share buyback proposal next week.Pharma stocks are also expected to react to the news of new FDA Commissioner Scott Gottlieb selected by US President Donald Trump.