NEW DELHI: For sometime till about a month back, it looked like external factors had stopped influencing stock markets, such was the driving force liquidity had become.
But over the past few weeks, markets have started paying heed to ground reality: some bleak commentaries in Fed minutes caused them to pause and take note last week; a fluctuating Dollar Index has become another dominant factor; markets globally have become more and more interested in the US elections; and the shifting dynamics in the US-China relations continues to cause occasional jitters.
Back home, an ongoing Supreme Court hearing on telecom AGR dues remains on market participants’ radar, as fortunes of multiple big businesses will get affected by the verdict.
Covid-19 continues to spread, though the business disruption caused by it has eased considerably. Markets remain glued to the developments on the vaccine front. And then, expiry of August F&O contracts will have its impact too.
“The RBI governor in the minutes of the MPC meet said the recent surge in retail inflation is negatively impacting the efforts by the central bank to revive economic growth. This remains a cause of concern in the near term. We expect volatility to remain high due to scheduled F&O expiry of August month contracts,” said Ajit Mishra, VP – Research, Religare Broking.
Going by the buzz on Dalal Street, here are some of the key factors that are likely to guide the market in the week ahead…
Tensions between the US and China continue to be a sore issue for investors. Chinese Commerce ministry last week said China and the United States have agreed to hold trade talks “in the coming days” to evaluate the progress of their Phase 1 trade deal. However, the Trump administration declined to acknowledge any such plans.
Adding to this, US President Donald Trump vowed to end the country’s reliance on China if elected president again. The uncertainty on the issue, apart from the US’ tough stance on Chinese tech companies, will continue to create volatility in coming days.
Derivative contracts for August are set to expire on Thursday, August 27, due to which there could be some volatility around that day as traders will shift their positions.
FII inflow soars
Foreign institutional investors have continued their bullish stance on India. During the last week, equity markets saw an investment of over 14,100 crore FIIs. In August till now, they have poured over 40,000 crore in Indian stocks, however, analysts said this also includes big chunks invested via stake buying and other fund raising activities.
AGR case hearing
The Supreme Court has been holding regular hearings in the AGR case. The tough stance of the apex court has been creating worries for the leading telcos. The court has been rooting for Airtel and Jio paying AGR dues of Reliance Communications and Videocon, respectively, as they have been using their spectrum.
Fast rising Covid cases continue to be a headache for not just civic authorities but market participants as well, as it continues to be the cause for disruption of economic activity and businesses across India.
As of Sunday morning, known cases of coronavirus in India have crossed above 30 lakh mark with nearly 57,000 deaths, The country is still recording patient count at the highest rate in the world.
Q1 earnings: Last leg
June quarter earnings season has entered the last leg with only a handful of major companies scheduled to report their earnings during the next week, which analysts believe could lead to stock specific actions. IRB Infra, LIC Housing Finance and Suzlon Energy will release the numbers on Monday, followed by Atul Auto, CanFin Homes and Ircon International on Tuesday. Gillette India will present its numbers on Wednesday, Avanti Feeds, Edelweiss Financials, GMR Infra, ICRA, IDFC and Salasar Techno Engineering on the next day. Friday will see Inox Wind and SJVN release its quarterly numbers.
Bank loan growth data
The next week will also see RBI releasing data on growth in bank deposit and loan book for the fortnight ending August 14. As per the last announcement, the deposit growth was 11.1 per cent and loan growth stood at 5.5 per cent. The central bank will also release foreign exchange reserve data for the week ending August 21 on Friday.
Broader market movement
Broader market indices have been a standout story in the last couple of weeks, outperforming their headline peers significantly. The momentum in mid and smallcap stocks also tells that investors are moving towards broader market space in search for value. Market participants will keep a track on the space to get more cloues for future winners.
Nifty witnessed highly volatile sessions with gap ups and gap downs and finally closed the week on a positive note. The index is now trading at a confluence zone of trendline resistance drawn by connecting previous pivotal lows and the 78.6 percent Fibonacci retracement of all-time highs to the bottom of 7,500, said analysts.
“The market is at a crucial juncture with lack of participation from index movers and the financial space is already struggling with its own problems and underperformance. The short term trend is still intact and can be considered bullish, however, this upside is limited. Immediate support for the index is now placed at 11,100,” said Nirali Shah, Senior Research Analyst, Samco Securities.