6 factors that may chart market direction in the coming week

NEW DELHI: Dalal Street witnessed mixed trading through the week gone by as both the bulls and the bears wrestled to take control of the market. While the former continued their record marathon in the first two sessions of the week, the latter made a remarkable comeback in the latter half with support from weaker PMI readings, jitters over stock valuations and geopolitical tensions. Developments over the week also raised doubts whether domestic stocks are heading for a longer correction and if the bulls were losing steam? The S&P BSE Sensex on Friday ended 88 points higher at 32,325 with Hero MotoCorp (up 3 per cent) being the top gainer and drug major Dr Reddy’s (down 4 per cent) the worst laggard. NSE’s Nifty50 index rose 53 points to close the session at 10,066, with 36 constituents ending in the green and rest in the red. On a weekly basis (July 28 – August 4), Sensex gained 0.04 per cent while NSE’s Nifty added 0.51 per cent. Among key highlights, RBI’s money policy decision played market mover as Governor Urjit Patel & co slashed the repo rate by 25 basis points to 6 per cent. However, the quantum of rate cut did not cheer investors as they were eyeing 50 bps rate cut amid benign inflation and low credit growth. July auto sales figures boosted sentiment as most automakers reported healthy growth in monthly sales. The development helped Nifty Auto Index scale fresh high during the week. Pharma stocks continued to be in pain. Already reeling under weak Q1 results of drug majors Lupin and Dr Reddy’s, pharma stocks faced another jolt during the week when the USFDA issued 10 observations on Biocon’s Bangalore plant and Teva, world’s biggest generic drugmaker, announced worst-than-expected earnings and weaker outlook. The week also saw rupee soar to a two-year high against the greenback. Two IPOs – that of SIS and Cochin Shipyard – were a huge success. While the issue of SIS witnessed 6.91 times subscription, the Cochin Shipyard issue was subscribed 76.1 times. Among major announcements, Finance Minister Arun Jaitley on Friday launched a new ETF under the name Bharat 22, which will comprise shares of 22 companies. The ETF will have a single company cap of 15 per cent, while the sectoral cap has been pegged at 22 per cent. The Finance Minister said Bharat-22 ETF would comprise government’s holding in SUUTI, CPSE ETF and PSU banks. The decision is likely to have an influence on the market when it opens for trading on Monday. Let’s have a look at the events that are likely to steer the market in the coming week. Next batch of quarterly results June quarter results of India Inc will continue to be the major factor to guide market next week. Q1 results have been a mixed bag so far, as the numbers from IT and pharma counters have been mostly depressing! In the coming week, the next set of companies is scheduled to release their financial results for the quarter. Prominent among them will be Britannia Industries and Tata Steel, which are scheduled to announce their numbers on Monday, August 7. Thermax will declare results on Tuesday while Bank of India, Aurobindo Pharma, Eicher Motors, NHPC, NMDC and Tata Motors will do so on Wednesday i.e. August 9. Bharat Heavy Electricals, GAIL (India) and MOIL will declare results on Thursday (August 10) and Bank of Baroda, BPCL, Cipla and Hindalco Industries on Friday, August 11. IIP numbers The index of industrial production (IIP) data for June will be released after market hours on Friday, August 11. Industrial output growth slumped to 1.7 per cent in May from 8 per cent a year-ago due to poor performance of mining and manufacturing. The factory output growth, measured on the Index of Industrial Production (IIP), for April-May period decelerated to 2.3 per cent from 7.3 per cent in the same period last fiscal, as per the data released by the Central Statistics Office. The data further revealed that output of the capital goods segment, considered as key indicator of investment, shrunk by 3.9 per cent compared to a high growth of 13.9 per cent recorded in May 2016. GST Meet The GST Council, headed by Finance Minister Arun Jaitley, took a slew of decisions on Saturday including approval to implementation of the electronic way bill system, creation of necessary structural framework for anti-profiteering mechanism and providing relief to the agitating textiles sector by slashing rate of job work to 5% from a high of 18%. The council also cut the tax rate on some tractor parts from 28% to 18% and also lowered rate for rent a cab service. The E-way bill would be rolled out from October 1, said an official. The minister said E-way bill will not be required to transfer exempted goods. Work contracts under GST will be taxed at 12% with input tax credit. The stock market is likely to have some influence of the decisions with select sectors like textile and auto-part makers hogging the limelight. What the technical charts say “The market is taking the strong support of 20 days moving average (DMA) at the present levels and along with that momentum indicators are also supporting the market where immediate resistance can be seen at 10,150 levels,” says Abnish Kumar Sudhanshu, Research Head, Aadya Trading & Investments. “On the flip side, 9,940 could be the stronger support over short-term where a close below could be the only signal that might bring some selling pressure over near future,” Sudhanshu adds. Analysts Milan Vaishnav said the pharma sector is likely to show improvement in the coming days. Metals and IT sectors will also join this relative outperformance. In his words, “We expect these sectors to do good even with strength seen currently in the US dollar. The broader market will continue to lose momentum.” Realty, FMCG and auto stocks are likely to slow down and lose momentum gradually. “We expect select energy stocks to show some outperformance,” he says. US jobs report Signalling strong economic growth, the US posted robust jobs numbers for July, bolstering the likeliness of US Federal Reserve to announce a plan to start shrinking its massive bond portfolio in its next policy meet in September. The US Labor Department said on Friday that nonfarm payrolls increased by 209,000 jobs last month amid broad-based gains. June’s employment gain was revised up to 231,000 from the previously reported 222,000, said a Reuters report. “Average hourly earnings increased nine cents, or 0.3 per cent, in July after rising 0.2 per cent in June. That was the biggest rise in five months. On a year-on-year basis, wages increased 2.5 per cent for the fourth straight month,” Reuters further reported. Global cues Among global data, Japan trade balance data for the month of June 2017 is scheduled to release on Monday, August 7, 2017. China trade balance data for the month of July is scheduled to release on Tuesday, August 8, 2017. China foreign direct investment (FDI) data for July is slated on Friday, August 11, 2017. These apart, the progress of monsoon rains back home, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar and crude oil price movement will dictate trend on the bourses in the week ahead.
Source: ET

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