Centre’s recent moves to help revive the economy, by announcing several measures in the last month, have renewed confidence among investors. As a result, the market rallied for the third consecutive week ended September 27.
Hope for a US-China trade deal after US President Donald Trump’s comments, also lifted sentiments.
Benchmark indices gained over 2 percent during the week, outperforming broader markets, as the BSE Midcap and Smallcap indices rose a percent each. However, in the last three weeks, frontliners climbed 5 percent and broader markets gained 6-7 percent.
After pricing in most of the fiscal measures moves, the market is expected to consolidate in the coming truncated week. The focus will shift to the RBI policy decision scheduled for September 27, which could give further direction and decide mood on the street, experts feel.
“Markets are expected to consolidate further with the bias on positive side. We feel the upcoming RBI monetary policy review meet could trigger the next directional move,” Ajit Mishra Vice President – Research at Religare Broking told Moneycontrol.
Meanwhile, he suggests continuing with stock-specific trading approach and focusing more on the index majors for short term trades.
Vinod Nair, Head of Research at Geojit Financial Services also feels a muted trend may happen in the short term as market is considering if the Reserve Bank of India (RBI) may change its stance given a deep cut in tax revenue impacting fiscal strength of the government.
The sectoral trend was mixed in week gone by, as BSE Bank, FMCG, Capital Goods and Energy gained 3.5-4 percent whereas Auto, Pharma, IT, Metal and Realty were down 1-2.5 percent.
The equity market will remain shut on October 2 for Mahatma Gandhi Jayanti.
Here are 10 key things that will keep traders busy this week:
RBI Interest Rate Decision
The Monetary Policy Committee (MPC)’s interest rate decision, growth projections and RBI’s commentary especially after corporate tax rate cut would be key event to watch out for in the coming week.
After cut in repo rate by 110 bps in 2019 to 5.4 percent, most of experts expect another 25 bps cut in the fourth bi-monthly monetary policy review scheduled to be held on October 4, 2019.
All analysts which participated in the Moneycontrol poll last week voted for a rate cut in October policy meeting. But, they do not expect it to go down below 4.30 percent in future.
After tax rate cut on September 20, RBI Governor Shaktikanta Das had said that India cannot lower its interest rates to the level of advanced economies, though the central bank could do more to spur growth given the inflation target within its target of 4 percent.
The September sales of automobile companies will be released on October 1. They are expected to remain weak, though the sentiment improved with Nifty Auto index (up 9.2 percent) outperforming Nifty50 (up 7.5 percent) after the corporate tax rate cut.
Discounts offered by auto companies in the last few months has failed to revive expected demand. Now, after the corporate tax rate cuts many companies have started offering more discounts. These are at a record high now. Companies are also increasing advertising and promotional activities.
Hence, the sentiment seems to have improved and as a result of walk-ins and footfalls in dealers shops also improved in September. However, the overall slowdown could continue for some more period as September sales de-growth could be in double digit, experts feel.
“While these actions are positive for the auto industry and focus shifts back to demand recovery — green shoots of which are already visible in the form of month-on-month improvement in inquiries and retails, they are not aimed at demand creation in the near to medium term,” said Motilal Oswal.
Hence, Maruti Suzuki, TVS Motor, Tata Motors, Ashok Leyland, Bajaj Auto, Hero MotoCorp, Eicher Motors etc will be in focus.
US-China Trade Tensions
Globally, the trade battle between world’s largest economies — US and China — which has been going on for over one-and-half-year now, will continue to be a talking point as it could get escalated further after recent reports in the media.
The Trump administration may limit US portfolio investments into China and the delisting of Chinese companies from US stock exchanges was part of a broad effort to limit US investment in Chinese companies, the reports from Reuters said quoting unnamed sources.
It is a surprise especially after Trump’s recent comments at United Nations, saying the trade deal between US and China could happen sooner than people think. The US markets reacted on September 27 with Dow Jones, S&P 500 and Nasdaq Composite ending 0.3-1 percent lower.
Hence, the likely trade talks somewhere in mid-October will be crucial to watch out for.
The barely increase in consumer spending in August and weak business investment indicated that the trade tensions impact may be hitting American economy while Chinese data already impacted by the trade war.
Crude Oil Price
Oil prices remained favourable for India as Brent crude futures fell 3.7 percent during the week to close at $61.91 a barrel amid global demand worries on escalated trade war.
India imports more than 85 percent of oil requirement, hence any fall in the international benchmark is always positive.
Now all eyes on resumption of the actual oil supply from Saudi Arabia as it assured restoration of supply by September-end after its two oil fields affected due to drone attack which had lifted Brent oil to over $71 a barrel in September.
The primary market will be again seen active in October, after a quiet period for nearly two months on mainboard IPO segment. Two initial public offerings will hit the street in coming week.
The Rs 645 crore public offer of state-owned Indian Railway Catering and Tourism Corporation (IRCTC) will be opened for subscription during September 30-October 3, with a price band of Rs 315-320 per share. It is an offer for sale, hence all issue proceeds will go to government.
Most brokerages advised subscribing the issue given its unique business model, no competition, strong earnings profile, healthy return ratio and debt free status.
Vishwaraj Sugar Industries is another IPO scheduled to be opened during September 30-October 4, with a price band of Rs 55-60 per share and the company aims to raise in the range of Rs 55-60 crore, for which one brokerage has given weak rating while other advised avoiding the same.
Infrastructure output for August and fiscal deficit for April-August period will be released on Monday while current account deficit and external debt for April-June quarter will be announced on same day.
The fiscal deficit in first four months of FY20 stood at Rs 5.47 lakh crore or 77.8 percent of government’s total budget estimate of the year.
Markit Manufacturing PMI for September month will be declared on Tuesday while Services PMI for September and foreign exchange reserves data for week ended September 27 will be released on Friday.
The Nifty50 rallied more than 2 percent and managed to hold the 11,500 levels, forming the Spinning Top kind of pattern on the weekly scale while there was a bearish candle formation on the daily scale Friday.
The indecisive kind of chart formation indicated that there could be a consolidation in coming week after a rally in last three consecutive weeks.
“Markets are currently seeing a consolidation after the recent rally and we expect the positive bias to extend further in the coming week. However, the upside seems capped and Nifty could face profit-taking around 11,700-11,800 zone. On the downside, 11,350-11,250 zone would act as support,” Ajit Mishra, Vice President Research at Religare Broking said.
Option data also suggests the Nifty could remain in a range of 11,300-11,700 levels in coming days, after consolidating around 11,500 levels following 1,000 points rally.
Maximum Put open interest is at 11,000 followed by 11,500 and 11,400 strikes while maximum Call open interest is at 11,500 followed by 11,200 and 12,000 strikes. Minor Put writing was seen at 11,500 followed by 11,000 strike while Call writing was seen at 11,700 followed by 12,000 strike.
“The noticeable Put base after 11,500 is placed only at 11,000, which means Put writers are sceptical of writing closer strikes other than 11,500. The noticeable Call base is also placed at 11,500, which means the Nifty may enter into short-term consolidation with immediate support at 11,400,” Amit Gupta of ICICI direct said.
India VIX moved up by 4.64 percent from 15.40 to 16.11 levels.
Apart from the above factors, there are some corporate actions scheduled to be taking place in coming week:
Along with US-China trade developments, following global data points will also be closely watched in coming week:
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