Market Week Ahead: Rupee, trade war likely to weigh on markets; oil and macro data to be in focus
Here are top 10 factors that will keep traders busy next week.
The market took a breather as bears managed to get full control at Dalal Street for the first time in last seven consecutive weeks, thanks to a sharp weakness in rupee owing to dollar demand and higher crude oil prices.
The 50-share NSE Nifty corrected 0.78 percent to close the week at 11,589.10 and the 30-share BSE Sensex lost 0.66 percent to 38,389.82 after rising 6 percent in previous six straight weeks. But the weekly losses trimmed due to short covering or value buying in last couple of sessions on stability in rupee and crude oil prices.
Broader markets underperformed frontline indices with the BSE Midcap index falling 2.2 percent and Smallcap 1.7 percent in the week gone by.
The weak start to September month does not mean bulls are out of the game. Consolidation may continue for a while until things like crude, rupee and trade war stabilise.
sentiments will continue to remain sluggish. Global clues, macroeconomic data, movement of rupee against the dollar and crude oil price movement will dictate the sentiments in the near term.
Indications are mixed at present and we feel Nifty would face pressure at higher level. Traders should limit leveraged positions and use bounce to reduce exposure. Also, maintain extra caution in stock selection.
We does not expect big fall as fundamentals are improving and a lot of companies in Nifty 50 already benefited from rupee fall. The fall in rupee is a bit of catch-up to other emerging market currencies like Argentina peso, Turkish lira, etc. but the market has done very well despite a sharp fall in the currency.
After the recent correction emerging markets (EM) are good buying opportunities, unless something happens bad in China, which will affect the EM contagion. "Stable dollar and China can get EM out of the woods.
The stock market will remain shut on Thursday for Ganesh Chaturthi.
Here are 10 key factors that will keep traders busy next week:
Rupee
The first key thing to watch out for in the coming week would be the Indian rupee that has seen sharp depreciation to hit a historic low of 72.10 against the US dollar last week, but managed to recover on Friday.
It corrected a percent from 71 to close the week at 71.74. Year-to-date fall in currency was 12.32 percent due to persistent global headwinds and concerns on macroeconomic front.
Experts think rupee will stabilise in next few weeks due to likely intervention by RBI and government, but if it falls more than expectations, the currency depreciation cost could outweigh benefits like exports and automatic adjustment of trade deficit in policy circles.
We believe, policy makers should be equally mindful of the costs of rupee depreciation. There are many components of such cost like India's short term debt obligations at $218 billion due on Dec’18, oil import bill, inflation, consumption and fiscal cost.
On the other hand, dollar demand structurally continued to be strong as data remained solid whether it is jobs or manufacturing.
Crude
Crude is another important key point to look at as after stabilisation from $80.50 a barrel levels to around $71-72 in two-month period moved up again towards $80 followed by correction in last couple of sessions.
Brent crude oil futures lost 0.8 percent during the week and corrected 3.6 percent from the weekly high of $79.72 a barrel on stronger dollar, weakness in equity markets and tropical storm Gordon.
Crude is always a risk for country like India, which imports more than 80 percent of oil requirement.
The key risk is a rise in crude price accompanied by a fall in rupee. Beyond a threshold, this combination is going to push current account deficit to a point where it becomes highly inflationary for the economy and can disturb the fiscal balance. The recent rise in bond yield is indicative of the same and that surely implies the possibility of both earning downgrades and valuation multiple ranges shifting downward.
Trade War
Trade war between world's largest economies US and China seems to be endless as both countries have been playing tit-for-tat game.
After the expected implementation of tariff on $200 billion worth of Chinese goods very soon, US President Donald Trump on Friday announced another tariff list saying the US is ready to put tariff on an additional $267 billion worth in Chinese goods.
Hence, experts said the possibility of talks for trade deal between both countries are fading as there is likely revamp of North America Free Trade Agreement (NAFTA) from the US. "We are surprised by the market which has not reacted to recent US tariff on $200 billion worth of Chinese goods," Mihir Vora, Chief Investment Officer of Max Life Insurance said.
Macro Data
The most important data point to watch out for would be July industrial production and August CPI inflation due on Wednesday. WPI inflation data for August will be announced on Friday.
Industrial production rose to a five-month high of 7 percent in June while CPI inflation fell to 4.17 percent in July, lowest in nine months, driven by cheaper food items.
Foreign exchange reserves for the week ended September 7, deposit & bank loan growth for week ended August 31, and balance of trade for August will also be released on Friday.
Fund Flow
Foreign institutional investors turned net buyers of around Rs 1,900 crore in September so far against more than Rs 2,000 crore worth of selling in August. In FY19 so far, they have been net sellers of about Rs 13,000 crore in India compared to Rs 1,000 crore worth of buying in same period last fiscal.
Experts believe the FII flow is unlikely to improve soon as investors will closely watch indication of general elections before entering in India big way. They expect a consistent flow from domestic institutional investors (DIIs) will continue.
DIIs continued to be net buyers since April 2017 helping the market to remain positive in terms of returns. These investors bought more than Rs 1,100 crore worth of shares in September so far, as per provisional data.
Technical Outlook
The Nifty50 after recent correction moved towards near term resistance level of 11,600 and got support at 11,500-11,550.
The recovery in the last couple of sessions indicated that the index may make an attempt to move towards 11,700-mark but formation of 'Hammer' kind of pattern for last three consecutive days suggested that the consolidation is expected to continue for a while before getting directional move on either side.
Bullish reversal candle on daily scale (Friday) suggests a bounce back move while Bearish Engulfing candle on weekly scale suggests a limited upside, thus a tug of war between bulls and bears are likely to continue.
The index has to continue to hold above 11,550 zones to extend its up move towards its 61.80 percent retracement of 11,620 then 11,666-11,700 zones while on the downside supports are seen at 11,500 then 11,450 zones.
With trade tensions coming into limelight once again, Amit Gupta of ICICI Securities expects Nifty to remain volatile with major support around 11,450 levels.
F&O Picture
Options data indicated that maximum call open interest (OI) of 40.01 lakh contracts was seen at the 11,800 strike price, which will act as a crucial resistance level for September series, followed by 12,000 and 11,600 strikes.
Maximum put open interest of 47.64 lakh contracts was seen at the 11,500 strike price, which will act as a crucial support level for September series, followed by 11,400 and 11,000 strikes.
Call unwinding was seen at immediate strikes while Put writing was seen at 11,500 and 11,600 strikes.
Option band with its early OI inventory signifies an immediate trading range in between 11,500 to 11,700 zones. India VIX had a spurt of 10.24 percent at 13.89 and rise in VIX suggests limited upside in the market.
Stocks in Focus
Tata Motors: Jaguar Land Rover reported total retail sales of 36,629 vehicles in August, down 4.9 percent YoY. Jaguar retail sales up 7.7 percent YoY at 11,802 vehicles and Land Rover sales down 9.9 percent to 24,827 vehicles. Retail sales up 64.9 percent in UK, overseas markets 20.2 percent and North America up 2.5 percent, with Europe slightly below last year (up 3.1 percent) while China sales down 38.1 percent YoY.
Reliance Capital: Company has received Certificate of Registration from the Reserve Bank of India as Core Investment Company - Non-Deposit Taking Systemically Important Institution.
HDFC Life board to meet on September 12 to consider appointment of new MD, CEO
Jet Airways gets government approval to appoint Sharad Sharma as independent director
Axis Bank appoints Amitabh Chaudhry as MD & CEO, to take charge from Jan 1
Adani Enterprises: Adani Agri Logistics (AALL), a wholly owned subsidiary of the company, has incorporated a WOS namely Adani Agri Logistics (Samastipur).
RITES: Company has secured an additional work of Rs 294.67 crore from Ministry of Railways for doubling of Dharmavaram Penukunda rail lines (41.5 Kms) in South Western Railways.
Cyient: Cyient Australia Pty Ltd, a wholly subsidiary of Cyient Limited has acquired 86 percent in Cyient KK (another subsidiary of the company).
Goa Carbon: Production for August at 13,730.8 MT and Sales at 14,726.8 MT.
Akzo Nobel India: Jayakumar Krishnaswamy will be stepping down as the Managing Director of the company with effect from September 12 and Board appointed Rajiv Rajgopal as Managing Director with effect from November 1. Pradip Menon will be stepping down as the Chief Financial Officer of the company with effect from September 14.
Zenith Exports: IL&FS Securities Services released 3,08,224 equity shares of the company, representing 5.71 percent of the paid-up capital on September 6.
Omax Autos: Board has approved the proposal for establishing a new manufacturing unit at suitable location in Uttar Pradesh, for manufacturing products and equipment supplied to Railways.
CES Limited: Company has withdrawn record date of September 21 for bonus issue of 27 equity shares for every 1 equity share held.
Indo Count Industries: ICRA reaffirmed its long term rating as AA minus and revised outlook on the long term facilities to Stable from Positive. CARE reaffirmed long term bank facilities as AA with outlook as Negative.
Mcleod Russel: HDFC AMC through its three funds hold 5.29 percent stake in the company.
Divya Jyoti Industries: Ankit Maheshwari has resigned from the post of Chief Financial Officer of the company w.e.f. September 6.
7NR Retail: Due to pre-occupation Deepak Rawal has resigned from the post of internal auditor of the company for the financial year 2018-19.
Williamson Magor: Board approved the proposal to issue secured redeemable non-convertible debentures of face value of Rs 10,00,000 each aggregating to Rs 100 crore on private placement basis to IL&FS Financial Services.
Sical Logistics: Board approved issue of equity shares on preferential basis.
Reliance Power & Reliance Naval: Both companies pledge shares with Yes Bank.
Bank of Maharashtra: RBI imposes penalty of Rs 1 crore for contravention of master circular on fraud.
Bank of India: RBI imposes Rs 1 crore penalty for contravention of circular on fraud.
Union Bank Of India: RBI imposes penalty of Rs 1 crore for contravention of circular on fraud.
MORE WILL UPDATE SOON!!
