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10 key factors that will keep traders busy this week

Investors must ideally avoid largecaps as they are in the overvalued zone while selective beaten down mid and smallcaps could be bought, Jimeet Modi advised

May 26, 2019 / 07:34 AM IST
 
 
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The week ended May 24 was a historic one for the equity market as the benchmark indices as well as Bank Nifty touched new all-time highs with the Sensex crossing 40,000 and Nifty 12,000 intraday as Narendra Modi-led National Democratic Alliance (NDA) came back to power.

NDA saw landslide victory by winning 353 seats including 303 seats (addition of 21 seats over 2014) for the Bharatiya Janata Party (BJP) itself.

Sensex and Nifty rallied nearly 4 percent each during the week and ended at record closing highs while Bank Nifty gained 6 percent and Nifty Midcap index climbed nearly 5 percent.

After such a spectacular run, there could be some consolidation in the coming week and the market will closely watch two key events - RBI policy in June and Union Budget which could be in July apart from global factors like oil, trade war etc, experts said.

"This landslide victory has raised hopes that the government would take decisive actions to boost business sentiment and that in turn will support the market growth. We feel this feelgood factor could extend next week too, provided feeble global cues do not spoil the party," Jayant Manglik, President - Retail Distribution, Religare Broking told Moneycontrol.

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Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote said as of now, a wait and watch approach should be followed by markets at least till the Monetary Policy and Budget announcement by the newly elected Government, which might be a game changer.

Investors must ideally avoid largecaps as they are in the overvalued zone while selective beaten down mid and smallcaps could be bought, he advised.

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

Earnings

As we enter into the last week of March quarter earnings season, around 2,500 companies will declare their results including around 1,200 companies on May 30th itself. The list mostly includes midcap, smallcap and penny stocks while most of largecaps already announced their earnings. Overall, March quarter earnings season was mixed.

The important ones amongst them to watch out for would be Zee Entertainment, GAIL, Aurobindo Pharma, PNB, Sun Pharma, Adani Ports, BHEL, Colgate Palmolive, Emami, HAL, InterGlobe Aviation (IndiGo), Motherson Sumi, Natco Pharma, Oil India, Prestige Estates Projects, Reliance Communications, IRB Infrastructure, Manpasand Beverages, NMDC, SpiceJet, Adani Enterprises, Adani Power, Bharat Electronics, Cadila Healthcare, Havells India, Ipca Labs, NBCC, PFC, Power Grid, Reliance Power, TTK Prestige, Tata Teleservices, United Spirits, Apollo Hospital, Coal India, HDIL, IDBI Bank, NALCO, PC Jewelller, Prabhat Dairy, Reliance Infrastructure, Sadbhav Engineering, SAIL, Suzlon Energy.

Measures by the new government

After NDA's thumping victory and as the government formation is expected to be announced on May 30, the key things to watch out for would be decisive measures from Modi government to ease liquidity crisis, boost consumption growth, improve economic growth through reforms, get earnings back on track, strengthen banks which can further improve credit growth, boost infrastructure growth, etc.

Auto sales

As auto sales data for May 2019 will be released on June 1, key stocks to watch out for would be Maruti Suzuki, Tata Motors, Ashok Leyland, M&M, Eicher Motors, TVS Motor, Bajaj Auto, Hero MotoCorp, etc.

Auto sales for the last several months had been either mixed or tepid due to a slowdown in consumption especially after NBFC liquidity crisis, increase in the cost of ownership, etc.

Country's largest car maker Maruti Suzuki cut its production capacity in April and March amid a slowdown. Hence, the street will closely watch sales data for the next few months.

Macro data

India's GDP growth rate for Q4FY19, infrastructure output for April, and foreign exchange reserves data for the week ended May 24 will be announced on May 31.

GDP fell 6.6 percent, the six-quarter low, in Q3FY19 against 7 percent in Q2FY19 and 7.7 percent in Q3FY18. The RBI in its April monetary policy statement said it expects FY20 GDP growth to be 7.2 percent. It expects GDP to be in the range of 6.8-7.1 percent in the first half of FY20 and 7.3-7.4 percent in the second half, with risks evenly balanced.

Crude and rupee

The movement in crude oil price and rupee will also be keenly watched by the street in the coming week.

The Indian rupee gained sharply from 70.22 a dollar on May 17 to 69.52/$ on May 24, after a win by NDA in Lok Sabha polls.

Brent crude futures, the international benchmark for oil prices, fell to $68.69 a barrel from around $73 during the week amid rising inventories and concern over the economic slowdown.

FIIs data

Foreign institutional investors, so far, are net buyers in India in May especially due to buying after exit polls and Lok Sabha election results. Before election results, they were cautious and had turned net sellers.

They net bought around Rs 900 crore worth of shares in May, following more than Rs 68,500 crore of buying in the previous three months.

Most experts expect the inflow to continue after election verdict and if Modi government takes strong measures to bring growth and earnings on track then flow could increase sharply.

"Foreign investors certainly will take heart from a fairly large National Democratic Alliance (NDA) victory. I think I am more interested in what the domestics are going to do," Teresa Barger, Co-Founder and CEO, Cartica Capital told CNBC-TV18 during the week.

On the other side, domestic institutional investors were net buyers in May (over Rs 6,000 crore of buying) after selling in the previous three months.

Technical outlook

Nifty gained for the second consecutive week and ended at fresh record closing high of 11,844 on May 24, gaining 3.8 percent. The index formed a bullish candle on the weekly scale.

"Nifty during the week witnessed faster retracement of April-May fall (11,856-11,108) by rallying over 900 points in just eight sessions. The faster retracement signifies a structural turnaround that makes us confident for upmove towards 12,200 in coming weeks as it is the 138.2 percent external retracement of April–May decline placed at 12,142," Dharmesh Shah, Head – Technical, ICICI direct told Moneycontrol.

Deepak Jasani, Head of Retail Research, HDFC Securities also said further upsides are likely in the coming week once the immediate resistances of 11,858-11,884 are taken out. Crucial supports to watch for resumption of weakness is at 11,658-11,591," he added.

F&O Cues

On the options front, maximum Put open interest (OI) was at 11,000 followed by 11,500 while maximum Call OI was at 12,500 followed by 12,000.

Significant Put writing was at 11,700 followed by 11,600 while minor Call writing was at 12,100.

Option band signifies a trading range between 11,600 to 12,100, said Chandan Taparia of Motilal Oswal.

Volatility index corrected 41 percent during the week from 28.08 to 16.46. During the week, it made a 44-month high of 30.18 but after the election outcome, it fell drastically to 16.46.

Decline in VIX suggests that now short-term stability and formation of a higher base is seen in the market, Chandan Taparia said.

Corporate Action

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Global cues

Apart from below data points, any development related to US-China trade war would be closely watched in the coming week.

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Sunil Shankar Matkar
first published: May 26, 2019 07:34 am
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