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Last Updated : Aug 11, 2019 07:44 AM IST | Source: Moneycontrol.com

10 key factors that will keep traders busy this week

The market will remain shut on August 12 for Bakri Id and on August 15 for Independence Day

Sunil Shankar Matkar

The 900 points rally in last two straight sessions lifted sentiments and drove benchmark indices higher for the week that ended on August 9.

It was the first weekly gain seen by the market after consistent selling in previous four consecutive weeks, when indices lost more than 6 percent.

The BSE Sensex gained 1.25 percent to close week at 37,581.91 and the Nifty50 advanced a percent to 11,109.65. The broader markets also ran in line with frontliners as the Nifty Midcap index climbed 1.5 percent and Smallcap index rose 1.2 percent.

Close

Finance Minister's assurance to Indian corporates and the strong hope for plethora of financial measures ranging from tax cuts, subsidies and other incentives too, and the rollback of surcharge on super-rich being a key measure among these, lifted traders and investors sentiment and as a result short covering pushed market higher.

The major rally was seen in those sectors like auto, financial services (including NBFCs), consumption where selling was much higher compared to others earlier and which could get more benefitted from likely measures on top of 35bps rate cut announced by RBI. The upside in technology stocks was majorly due to rupee depreciation.

Experts feel considering the market was in deeply oversold zone pricing in most of negatives, the rally was on expected lines, but the trend in truncated week ahead could be rangebound as there are no major events ahead be it local or global and the market will closely watch out commentary from government over expected measures to revive economy.

"Although, investors' sentiment would continue to drive volatility in the stock market, the focus should be on how the government would tackle the tepid demand environment that suggests cyclical slowdown. As government measures to support growth plays out, we could see economy back on track of its long term growth story," Arun Thukral, MD & CEO, Axis Securities told Moneycontrol.

Vinod Nair, Head of Research at Geojit Financial Services also said trend may be unpredictable in the near-term nevertheless stability in taxation, ease in liquidity, supportive measures and fall in interest rates will benefit the economy in the second half of the year.

On August 13, the market will first react to June industrial output, which grew 2 percent against 7 percent in previous year.

The market will remain shut on August 12 (Monday) for Bakri Id and on August 15 (Thursday) for Independence Day.

Most experts advised picking quality stocks after June quarter earnings.

Here are 10 key factors that will keep traders busy this week:

Update on any tweak in FPI surcharge and stimulus measures to auto, NBFC etc

The two-day rally indicated that the news of likely measures to revive economy so far seems to have priced in, but the market is remain hopeful to see what kind of measures will the government along with RBI take to subside pressure. It all depends upon the outcome of the recent meetings of the FM with various stake holders from industries and capital market.

Lot of reports indicated that the government could tweak or rollback surcharge on super-rich, cut Goods and Services Tax (GST) for auto sector, reduce corporate tax, increase focus on NBFC sector including housing finance companies, change in criminal penal provisions for not using corporate social responsibility fund, increase infrastructure spending including affordable housing etc.

"Given the situation, earnings growth is moderating while valuation is expanding. As a result, equity is loosening its attractiveness as an investment class and funds are shifting to haven assets like bonds and gold. To bounce from this situation, corrective actions has to be pronounced by central banks by providing enough liquidity and rate cuts while governments have to announce worthwhile measures and US-China has to come out with meaningful trade deal. Any delay in this timely decisions can impact the global economy and market accordingly," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

Earnings

As we are in the last week of June quarter earnings season, more than 2,100 companies will announce their quarterly results in the coming week.

The list includes major companies like Sun Pharma, Coal India, ONGC, Bharat Forge, Motherson Sumi, Glenmark Pharma, Bosch, General Insurance, IDBI Bank, Grasim Industries etc.

Among others, Sadbhav Infrastructure, TTK Prestige, Century Textiles, Graphite India, GVK Power, Muthoot Finance, TBZ, SJVN, VA Tech Wabag, Shalimar Paints, Jindal Saw, Peninsula Land, Reliance Power, Chalet Hotels, RITES, MEP Infrastructure, Dr Lal PathLabs, Vakrangee, Blue Star, Ashoka Buildcon, Manappuram Finance, Ipca Labs, Reliance Infrastructure, Apollo Hospitals, PFC, Edelweiss Financial, GMR Infrastructure, Jain Irrigation Systems, Indiabulls Real Estate, Wockhardt, IDFC etc will also announce their earnings in first three days of coming week.

Rupee

The rupee fell sharply against the US Dolllar in week gone by, especially due to depreciation in Chinese yuan and political imbalance in Kashmir, though volatility stalled after RBI slashed repo rate by 35bps to 5.4 percent and hope of economic revival measures from government.

The US had imposed additional 10 percent tariff on $300 billion in Chinese goods in week ended August 2. In retaliation to counter the tariff threat, China asked state purchasers to halt imports of American agricultural products which dragged Chinese yuan to a 11-year low of around 7. As a result it put pressure on all emerging market currencies including Indian rupee.

The currency weakened by 2.9 percent to 70.79 a dollar in August so far and fell for fifth consecutive week. Experts feel the volatility may continue due to US-China trade tensions, though there is a support from lower oil prices.

"USDINR pair could rise till 71.20 while 69.50 is near term support. Any cool-off in US-China thaw will be positive for rupee in backdrop of lower oil prices," Amit Gupta of ICICI direct said.

As a result IT stocks remained in focus last week and the Nifty IT index turned biggest gainer, rising 2.6 percent as most IT companies earn income in dollar by exporting software services.

Crude

The falling crude oil prices are favourable to country like India which imports more than 85 percent requirement. It was one of reasons for equity rally and will be closely watch in coming days.

Brent crude futures, the international benchmark for oil prices, corrected by more than 5 percent last week on fears of demand slowdown amid deepening China-US trade war and unexpected build in US crude stockpiles. It already corrected by more than 21 percent from the 2019 peak touched in April and hit $56 a barrel during last week, the lowest level since January this year.

The International Energy Agency recently said global oil demand during January-May this year grew at its slowest since 2008, hurt by mounting signs of an economic slowdown and a ramping up of the US-China trade war.

Macro Data

In the coming holiday-shortened week, market participants will be eyeing some of important macroeconomic data including CPI Inflation and WPI inflation which are scheduled on August 13 and August 14 respectively.

India's retail inflation for June came in at an eight-month high at 3.18 percent against 3.05 percent in May, on the back of an increase in prices of pulse.

The data on balance of trade for July will also be announced on August 14.

On August 16, the data on foreign exchange reserves for week ended August 9, and bank loan and deposit growth for fortnight ended August 2 will be released.

FIIs

FIIs flow will be closely watched as they continued to remain net sellers last week, though they turned net buyer on August 9 for first time in last 29 straight sessions.

For the week, they net sold more than Rs 4,500 crore worth of shares in secondary market, taking total August selling to Rs 8,687 crore on top of Rs 16,870 crore outflow seen in previous month.

On the contrary, domestic institutional investors continued to support by pumping in same amount of money in August so far and more than Rs 20,000 crore in July.

Technical outlook

The Nifty50 smartly respected crucial 10,800 level and broke out on upside, marching above 11,100 level for the week. The index formed bullish candle on weekly scale, but on August 9, the Shooting Star kind of formation has taken place due to profit booking at higher levels towards the end which generally indicated a reversal pattern.

Overall experts expect some consolidation in coming truncated week and feel the 11,062 would be crucial level to watch for further upside and 10,800 would continue to be support level.

"We expect some consolidation in the index around the current levels prior to further upmove. We're now eyeing 11,250 in the Nifty and 10,950-11,000 zone would act as a cushion, in case of any decline. Having said that, the trend has not reversed yet so we advise keeping a positive yet cautious approach and maintaining extra caution in the stock selection," Ajit Mishra, Vice President - Research at Religare Broking said.

F&O Cues

Maximum Put open interest is at 11,000, which will act as a crucial support for Nifty in August series, followed by 10,800 and 10,700 strikes. Maximum Call open interest is at 11,500, which will continue to act as a crucial resistance for index, followed by 11,000 and 11,300 strikes.

Call writing is at 11,700, followed by 11,500 and 11,300 strikes while Put writing is at 11,100 followed by 10,800 and 10,600 strikes. Option data suggests the Nifty could trade in a range of 10,800 to 11,300 levels in coming sessions.

"The noticeable Call base of Nifty is placed at 11,300 and 11,500 strikes. On downsides, 11,000 Put has remained highest despite Nifty moving towards 10,800 level recently. We believe positive bias may remain intact till Nifty holds 11,000 level," Amit Gupta of ICICI direct said.

India VIX moved up by 4.28 percent from 15.19 to 15.84 levels in the last week. Volatility inched higher to 17.82 at the beginning of the week but remained stable in last four sessions.

"VIX has to cool down below 14 zones to get the stability and bulls grip in the market," Chandan Taparia of Motilal Oswal Financial Services said.

Corporate Action

Here are corporate actions in coming week:

Image11082019

Global cues

Apart from intensified US-China trade war tensions, here are key data points to watch out globally:

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First Published on Aug 11, 2019 07:44 am
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