After a volatile week gone by, the market is gearing up for another action filled week. Here are the key happenings to watch out for
Benchmark indices lost more than 3.2 percent in the week ended September 21 as bears tightened their grip on Dalal Street. The share market has posted the biggest weekly loss in 2018 on selling across sectors.
Panic selling in NBFCs on liquidity crunch fear, rupee and crude volatility, and trade tensions between the US and China weighed on the sentiments.
The 30-share BSE Sensex crashed 1,249 points to close the week at 36,841.6 and the 50-share NSE Nifty plunged 372.1 points to 11,143.1 while the BSE Midcap index lost 4.6 percent. Nifty Bank (down 5.7 percent) and Realty (6.5 percent) were hit hard during the week.
The market is expected to consolidate with a negative bias in the coming week which may bring valuations to reasonable levels, experts said, adding the focus will gradually shift to RBI policy meet and then Q2 earnings in October.
Technically, experts feel the Nifty may try to defend 11,000 level and September F&O contracts expiry could cause volatility in the market.
"Rumours and fears in the market is likely to rule the roost till the general elections in 2019 and investors must brace for such events, albeit, each such events gives long-term investors to accumulate their choicest stocks," Ajay Jaiswal, President – Strategies & Head of Research, Stewart & Mackertich Wealth Management told Moneycontrol.
In the current market scenario one should avoid leveraged positions and investors should diversify their portfolios and keep at least 15-20 percent in liquid funds or cash, he said.
Here are the key factors that will keep market players busy this week:
Fear of liquidity crisis and IL&FS issue
On Friday, the sharp sell-off was triggered largely by interest payment default by IL&FS and DSP Mutual Fund selling DHFL bonds worth Rs 200-300 crore at a discount. This led to fear that there could be a corporate governance issue.
Banks, housing finance companies and wholesale funded lenders were hit badly on Friday. Though these stocks recovered a bit after the clarification from DHFL and Indiabulls Housing Finance managements saying there was enough liquidity on books.
DSP MF also clarified its position on the sale of bonds blaming the internal liquidity crunch.
Adding to the woes IL&FS defaulted again and Managing Director and Chief Executive Officer of its financial services arm, Ramesh Bawa resigned on Friday.
The market will closely watch further developments on the issue.
The market will continue to keep an eye on rupee volatility, though it stabilised in later part of last week. The currency depreciated by 34 paise to end the week at 72.20 against the US dollar after hitting a record low of 72.97.
The rupee is likely to move downwards gradually and hit 74-75 levels in a couple of months, experts said, adding the fall will definitely boost exports and related sectors but will have an adverse impact on current account deficit of the country.
As September F&O (futures and options) contracts are set to expire on Thursday, the rollover of positions by traders may cause volatility in the market and also give some indication for next month.
Maximum Call open interest was seen at 11,500 strike price, which will act as a crucial resistance level in near term, followed by 11,600 and 11,400 strikes while maximum Put open interest was seen at the 11,000 strike price, which will act as a crucial support level in near term, followed by 11,200 and 11,100 strikes.
The Nifty50 broke psychological 11,000-mark but managed to defend the same level on short covering and value buying in quality stocks. The index fell from 11,515.2 to 11,143.1 during the week, making a strong bearish candle on the weekly charts.
At Friday's low of 10,866, it did not only retraced 62 percent of entire rally from the low of 10,417 in May 2018 but also almost tested 200-Day Moving Average of around 10,740 levels.
Experts said usually corrections tend to end with this kind of classic panic and retracement levels but it will be too early to conclude so.
"Strong indicator 100 DMA is around 11,025 levels, decisive closing below it will take index towards 200 DMA which is trading around 10,740 levels. However, a fall should halt around those levels of 10,700, where previous swing high/low and strong support trend line lines confluence zone exists," said Shabbir Kayyumi, Head - Technical & Derivative Research at Narnolia Financial Advisors.
On the other side, lower time frame downward sloping trend line breakout will be only above 11,320 level which indicates Nifty's close above 11,320 levels will lead rally towards 11,550/11,600, he added.
Fiscal deficit and infrastructure output data for the month of August will be released on next Friday.
Also, foreign exchange reserves for the week ended September 21 and deposit and bank loan growth for the week ended September 14 will be announced on the same day while India's external debt for Q2, too, will be released on Friday.
Next week, IPOs worth Rs 2,264 crore will hit the D-Street.
The first IPO is state-run Garden Reach Shipbuilders and Engineers which aims to raise Rs 345 crore at the higher end of price band of Rs 115-118. The issue will open for subscription on September 24 and close on September 26.
The second IPO is of AAVAS Financiers, an NBFC, which targets to raise Rs 1,734 crore through the issue during September 25-27 at the higher end of price band of Rs 818-821 per share.
Dinesh Engineers would be the last IPO of the week as well as month. The company seeks to raise Rs 185 crore at the higher end of the price band of Rs 183-185 per share, by issuing 1 crore shares.
IRCON International is expected to list on Friday after receiving subscription of 9.9 times.
As auto companies will announce its September sales data in the first week of October, auto stocks will be in focus on Friday.
In August, commercial vehicle sales were very strong but passenger vehicle, two-wheeler and tractors' numbers were lower-than-expected due to Kerala floods and delayed festive season.
Stocks in News
ICICI Bank: The bank proposed to acquire 8.85 percent stake in Avenues Payment India.
Biocon: Company's drug substance facility in Bangalore completed US FDA inspection with no observations.
Indiabulls Housing Finance: ICRA confirmed A1+ rating for company's Rs 25,000 crore commercial paper, and AAA rating for Rs 45,200 crore non-convertible debenture, Rs 15,000 crore retail bonds programme, Rs 5,000 crore subordinated debt programme and Rs 47,000 crore Line of Credit (LoC).
IL&FS: Company said it is unable to service obligation of LC payment to IDBI Bank due on September 21. Ramesh Bawa resigned as MD & CEO of IL&FS Financial Services.
Banks and NBFCs: RBI allowed banks & NBFCs to co-originate loans for creation of priority sector assets.
Kwality: Company has withdrawn its QIP with immediate effect.
Orchid Pharma: NCLT approved resolution plan by Ingen Capital Group for company.
ITD Cementation: Company won order worth Rs 845 crore.
Global Cues (Federal Reserve meet to be in focus)
Globally investors are gearing up for Federal Open Market Committee two-day meeting which is scheduled on Tuesday followed by a press conference on Thursday.
Experts expect rate hike by 25 basis points, which seems to have been factored in by investors, but the commentary would be key to watch out for.Bank of Japan's recent monetary policy meeting minutes will be released on Tuesday while European Central Bank's non monetary policy meeting will be held on Wednesday and ECB General Council Meeting on Thursday.