Rates and results to guide equity markets

Mumbai: The Indian central bank’s monetary policy review, along with key macro-economic data and the quarterly earning results, are expected to guide the equity markets in the coming week.

“The Reserve Bank of India’s (RBI) monetary policy is likely to take the centre-stage next week. But, this time, events running up to the announcement will attract more attention,” Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS.

“While a rate cut is less expected, the prospects of an announcement of the new Governor this month shall keep each action of the incumbent in focus.”

D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, told IANS: “It is expected that market would see some volatility in the coming weeks, with the government due to appoint a replacement for outgoing RBI Governor Raghuram Rajan.”

According to Aggarwal, investors’ sentiments will also be influenced by domestic cues such as the ongoing quarterly results season.

“The next batch of Q1 June 2016 corporate results will dictate near term trend of the domestic markets,” Aggarwal said.

Companies like DLF, Britannia, Hero MotoCorp, Idea Cellular, Adani Ports, Container Corporation of India, JK Tyre, and Lupin are expected to announce their quarterly results in the coming week.

“Banking stocks will be in sharp focus, with a bulk of state-owned banks scheduled for earnings release,” James elaborated.

Apart from quarterly results, the strong US non-farm payroll figure is also expected to influence investors’ sentiments.

“Monday’s trades will take a sharp look at previous Friday’s non-farm payroll figures, but with easy monetary policy embraced by central banks world over supporting stock markets, US rate hike fears are low,” James said.

The US Bureau of Labor Statistics last week reported that the total non-farm payroll employment increased by 255,000 in July.

The healthy data assumes significance as it can quicken the start of the next rate-hike cycle. A hike in the US interest rates can potentially lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India.

According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, equity markets are likely to experience volatile trade due to profit booking at higher levels in the coming sessions.

“Sugar sector stocks are likely to resume their upswing next week on support of strong fundamentals,” Desai cited.

“Investors will closely follow important cues like global markets sentiments, and monsoon progress in the next two-three weeks.”

Desai pointed out that investors will keep an eye on the pace of foreign funds flow in the Indian equity markets.

Provisional figures from the stock exchanges for last week showed a healthy influx of foreign funds worth Rs 2,835.78 crore.

Figures from the National Securities Depository (NSDL) revealed that FPIs were net buyers of equities worth Rs 683.16 crore, or $102.03 million, from August 1 to 5.

Besides, key macro-economic data numbers such as the factory output — Index of Industrial Production (IIP) — for June and inflation figures for July, will chart the next course of key indices.

Sector-wise, Information Technology (IT) stocks can witness negative sentiments cited Pankaj Sharma, Head of Equities, Equirus Securities.

“Cognizant which has reported numbers on Friday has once again cut its revenue growth guidance for the year, highlighting the challenges for volume growth in the sector,” Sharma said.

“As such, the April-June quarter results for Indian IT companies can be called at best mixed with a negative surprise reported by Infosys.”

Last week, the Indian equity markets closed flat despite a crucial breakthrough in passage of a major economic reform, healthy inflows of foreign funds and supportive global cues.

The positive cues were negated by a mid-week correction. Further, the key indices were dragged down by profit booking, lower crude oil prices, uncertainty ahead of macro-economic data and global events.

The 30-scrip sensitive index (Sensex) of the BSE gained only 26.49 points or 0.09 per cent to 28,078.35 points.

Similarly, the wider 51-scrip Nifty of the National Stock Exchange (NSE) edged up by 44.65 points or 0.52 per cent to 8,683.15 points.