Week Ahead: Auto sales, macro data among 10 factors for market to watch out for

Auto sales could be the first major cue in the New Year, along with some key economic data as well as movement on the crude front. The week would also mark the start of earnings season during the same month and the build-up to the Union Budget.

Bulls celebrated year-end party at Dalal Street on last trading session of calendar year post SEBI reforms yesterday, as the Sensex ended at record closing high, while it was a positive start to Nifty January series.

The SEBI's decision to allow exchanges to provide equity and commodity trading from next year; and to relax the entry norms for foreign portfolio investors boosted sentiment. The market, however, shrugged off fiscal deficit concerns.

The 30-share BSE Sensex rose 208.80 points to 34,056.83 and the 50-share NSE Nifty rallied 52.80 points to 10,530.70 today. For the week, indices gained 0.3 percent each.

The year 2017 was fantastic for the market as the Sensex spiked 28 percent and the Nifty surged 29 percent, driven by liquidity, government reforms, positive global cues, state elections results and hopes of earnings growth.

Arun Thukral, MD & CEO at Axis Securities, expects markets to do well as the corporate earnings improve going forward. "Though 2018 is being ushered-in amidst few macro concerns like rising crude oil prices, inching inflation along with an increase in the

government borrowing programme leading to some slippages on fiscal consolidation path; we feel that these developments would be short-lived," he said.

For the week ahead, auto sales could be the first major cue in the New Year, along with some key economic data as well as movement on the crude front. The week would also mark the start of earnings season during the same month and the build-up to the Union Budget. Here are 10 factors that are likely to move the markets ahead.

Auto Sales

The auto sector is likely to be in focus next week as major firms will declare their sales figure for the month of December.

On Friday, auto stocks gained ahead of the event. The Nifty Auto and BSE Auto index were up over 1 percent.

Tata Motors, Hero MotoCorp, Eicher Motors, Exide Industries and Motherson Sumi, among others, gained 1-3 percent on the NSE and BSE.

"Our channel checks indicate mixed 2W demand, with the momentum gained from the wedding season in the northern belt being partially negated by muted sales in Rajasthan, Gujarat and Maharashtra due to an inauspicious buying period. PV retails are picking up, driven by year-end related discounts and the rush to beat price increases from January. On the CV front, players are offering steep discounts (5% higher) and other incentives to clear the current stock ahead of the upcoming regulatory change that makes it mandatory for all new CVs to have air blowers (for better ventilation in the cabin) as a standard fitment from 1st January 2018," the brokerage said in a report.

Corporate Action

Around 10 companies will be meeting to discuss their results, raising of funds, and issue of securities, among others. NCL Industries will be meeting on January 2, 2018 to discuss its fundraising issue. Aarti Industries will be going ex-buyback on January 4, 2018. (Image source: SMC Research)

Economic Data

With the new month ahead, certain domestic data will be released next week. Nikkei manufacturing purchasing managers’ index (PMI) will be rolled out on January 2. The services PMI will also be rolled out on January 4, 2018. Official data on M3 money supply will also be released later in the upcoming week as well. (Image Source: SMC Research)

Stocks in Focus

Ferro Alloys Corp: The company has said that NCLT allowed the firm for further extension to submit resolution plan.

Jaypee Infratech: The company has received shareholder nod for appointment of Ram Bahadur Singh as CFO.

Allahabad Bank: The bank has raised Basel III-compliant additional tier-1 perpetual bonds series IV worth Rs 500 crore through private placement.

Brigade Ent: The realty major has purchased 12.95 Acre land for Rs 218 crore in Bengaluru.

Bank of India has received capital infusion to the tune of Rs 2,257 crore.

Central Bank of India’s Board will be meeting on January 3, 2018 to discuss infusion of Rs 323 crore by way of preferential allotment.

Cadila will be in focus after Zydus has received a final approval from US FDA for Valacyclovir tablets. They are used to treat herpes infections.

Phoenix Mills will be in focus after the company purchased shares in its subsidiary, Graceworks Realty and Leisure Pvt Ltd.

Technical Factors

The Nifty on Friday took support at the 5-days exponential moving average (DEMA) placed at 10,494 and made a strong bullish candle on the daily candlestick charts.

Formation of a bullish candle after two successive bearish candles tilt the trend in favour of bulls in the coming week. But, for the index to hit fresh record highs of 10600-10650, Nifty has to hold above 10500 on a closing basis.

HDFC Securities believes that underlying trend of Nifty from daily to monthly time frame is intact and bulls are still placed at the front seat. There is no confirmation of any reversal signals yet.

“The careful study of larger timeframe (weekly and monthly) is revealing that the market is gradually showing some signs of significant maturity at the new highs. Momentum and trend strength oscillators of weekly/monthly timeframes are indicating cautious approach at the highs,” the brokerage house said in a statement.

FII Flows

Domestic investors continued to be net buyers for December, offering support to the market at a time when FIIs have looked hesitant in this market too. Experts believe that it is this buying by DIIs that has provided the cushion to D-Street. For December, FIIs sold Rs 6,411.57 crore worth of shares, while domestic institutional investors (DIIs) were net buyers worth Rs 8,142.88 crore.

Global Cues

The Street will watch out for crucial economic data coming in from developed and other emerging markets. For instance, China, Europe and US will be declaring their manufacturing PMI on January 2, followed by truck sales and services PMI in US and China later in the week. Further, market could take cues from European CPI inflation, along with US employment data.

Crude

The Street will watch out for cues on the movement of crude oil. As such, markets have been rattled in the recent past on the back of rising oil prices. Brent crude prices have clocked USD 65-mark and have hovering around the same region. Meanwhile, US crude is also seen rising and settled around USD 60-mark.

Experts that Moneycontrol spoke to believe that so long that the commodity does not touch around USD 70, it may not be a threat. But a move above that could mean all bets being off.

Bond Movement

Bond yields have been rising in the recent past, largely on the back of inflationary issues as well as rising crude prices. This has, in turn, affected the markets here and got investors cautious of the movements as well.

Last week, the yields had also jumped after the government announced additional borrowing of around Rs 50,000 crore through gilts. The RBI has also swung into action as it cancelled two bond auctions on Friday. Yields were seen stabilizing after that move.

Going forward, experts believe, there could be further hardening on likely reversing of easing cycle by the RBI amid inflationary risks. Government borrowing has also worried investors.

Bitcoin

The Street would also look to see the regulatory view on bitcoins, the virtual currency which has witnessed phenomenal gains in the recent past. The currency clocked USD 19,000 during the year, before seeing a sell off, but has settled down from its wild swings.

The Ministry of Finance has cautioned people against investing in virtual currencies and compared them to ponzi schemes.

"There has been a phenomenal increase in recent times in the price of Virtual 'Currencies' (VCs) including bitcoin, in India and globally. The VCs don't have any intrinsic value and are not backed by any kind of assets. The price of bitcoin and other VCs, therefore, is entirely a matter of mere speculation resulting in spurt and volatility in their price."

Moreover, the Ministry of Finance has cautioned people against investing in virtual currencies and compared them to ponzi schemes.

"There has been a phenomenal increase in recent times in the price of Virtual 'Currencies' (VCs) including bitcoin, in India and globally. The VCs don't have any intrinsic value and are not backed by any kind of assets. The price of bitcoin and other VCs, therefore, is entirely a matter of mere speculation resulting in spurt and volatility in their price."

Simultaneously, in a note to clients, Morgan Stanley analyst James Faucette and his team made the case that it difficult to ascribe value to the cryptocurrency.

Bitcoin can’t be considered a 'real currency' like the U.S. dollar, because the cryptocurrency doesn’t have an interest rate associated with it, i.e. it has no cash flow, Faucette said.

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