The market gained momentum and closed truncated week ended September 13 on a positive note, with the Sensex and Nifty gaining more than 1 percent each.
The rally was supported by hope of more economic revival measures from government and likely rate cut after inflation remained under RBI target. Globally, easing US-China trade tensions and ECB stimulus lifted sentiment.
The broader markets also participated in run and outperformed frontliners with the BSE Midcap and Smallcap indices rising over 2 percent and 3 percent respectively.
After a rally, the market may initially react to the finance ministry's measures. But more or less, it could remain in a consolidative phase in the coming week. Unless measures consistently announced by government fructify or translate into positive numbers, the upside remains capped whereas the major downside is unlikely as most of negatives seem to have already priced in, according to experts.
"Despite government's efforts to boost the economy, Mr Market seems rather unhappy and is unwilling to move significantly higher. Ground level weakness has still not translated to the corporate earnings which is deterring the Street from taking any aggressive bullish stance," Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote told Moneycontrol.
He said markets are waiting for the festive season to gauge how the consumer spend pans out and whether there is a change in sentiments at the bottom of the pyramid. Till then the bourses are expected to be largely sideways in a broad trading band, he added.
Umesh Mehta, Head of Research, Samco Securities also said due to the slowdown at the ground level and liquidity issues, there is no sign of aggressive buying by investors. Hence, Indian bourses will be guided by global factors at least till the quarterly results start coming in, he added.
Here are 10 key domestic and global factors to watch out for in coming week:
Measures to boost exports, housing
The market will first react to several measures announced by Finance Minister Nirmala Sitharaman on September 14 to boost exports and housing sector, and will remain hopeful to see more action from government to revive economy.
Raising of interest equalisation scheme for MSMEs and exporters to 5 percent, replacing Scheme for Remission of Duties or Taxes on Export Product (RODTEP) over MEIS for exports, higher insurance cover, implementation of fully electronic GST refund system, Rs 1,700 crore for export guarantee are some of measures she announced to boost exports in several sectors including textile, the labour intensive space.
In case of housing sector, where various projects have been stalled for several months/years, she announced setting up special window of Rs 10,000 crore for projects which are 60 percent complete and are non-NPA and non-NCLT, lowering of rates for house building, etc.
Experts feel textile, housing, infrastructure, housing finance, metals, capital goods, exporters, etc will do well.
"Special Window to provide the much needed last mile funding for housing projects which are non-NPA and non-NCLT would also enable completion of unfinished homes. Exporters in labour intensive sectors should be happy with the new RoDTEP scheme from 01-01-2020 as it proposes to more than adequately incentivise exporters. Speedy ITC refunds and higher insurance cover for exporters should help in our view," S Ranganathan, Head of Research at LKP Securities told Moneycontrol.
FOMC Meet
The Federal Open Market Committee's two-day meeting on September 17-18 will be a key to watch out for this week as majority of economists and experts globally largely expect another 25 bps rate cut after 25 basis points rate cut in July, the first since financial crisis in December 2008.
"There is a high possibility that the US Federal Reserve may cut interest rates by 25 bps in the September month's meeting. Federal Reserve Chair Jerome Powell said that the US central bank would continue to act "as appropriate" to sustain the economic expansion," Abhishek Bansal, Chairman at Abans Group said.
The reports also suggest that Fed Funds watchtool indicates there is 80-90 percent chance of a 25 bps rate cut by Fed.
US President Donald Trump also insisted on more rate cuts to boost economy, especially after European Central Bank cut deposit rate by 10 bps to -0.5 percent and also relaunched a quantitative easing program by restarting bond purchases of 20 billion euros a month from November to boost the economy.
GST Council Meet
All eyes are also on the meeting of GST council, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states and Union Territories (UTs), which is scheduled to be held in Goa on September 20.
Several industries from biscuits to automobiles and FMCG to hotels, which are facing slowdown pressure, have been demanding for tax rate cut from GST Council.
Hence the council might consider demands for reducing taxes on products ranging from cars to biscuits keeping in mind the revenue position as any cut will have a direct impact on earnings of states, a senior government official told agency.
The official said as most of the states are of the view that slowdown in these sectors is because of cyclical and structural issues and not because of GST rates, the states would acknowledge the situation of the compensation cess fund, before considering any rate rationalisation proposal.
US-China Trade Issue
The US-China trade war is another factor to keep an eye on as if the issue further escalates then there could be more impact on global economy and markets.
Trump delaying the increase in tariffs on $250 billion worth of Chinese imports by 15 days to October 15 from October 1, 2019 and report of China exempting some US agricultural products (like soybeans, port etc) from additional tariffs lifted global markets sentiment last week.
The sentiments also improved after the US and China agreed to talk again in October to discuss trade issues. Hence all eyes will be on a meeting between both countries to resolve trade issue that battered financial markets and hit consumer sentiment.
Rupee
The rupee continued to appreciate in the passing week after hitting 72.39 a dollar, the lowest level since November 2018.
The currency gained 80 paise during the week to close at 70.92 against the US dollar and rose 146 paise from closing of September 3, in the wake of rising equities, falling crude oil prices, easing US-China trade tensions and stimulus package announced by European Central Bank.
The some more appreciation could be possible but there could be overall rangebound trade in the currency, experts feel.
"Going forward, we expect the rupee to face stiff resistance around 70.80 levels and witness some depreciation all over again," Ajit Mishra, Vice President Research at Religare Broking said.
"The local unit is likely to trade in the range of 70.80-71.60 levels. Markets would now focus on the upcoming Fed meeting for further cues," he added.
Meanwhile, the crude oil prices corrected during the week amid concerns about slower global economic growth, which remained supportive factor for country like India imports more than 80 percent of requirement.
Brent crude futures, the international benchmark for oil prices, fell more than 2 percent during the week.
Technical View
The Nifty50 closed near week's high after rallying 130 points and formed bullish candle on weekly scale, followed by Hammer kind of pattern in previous week. The index also saw a bullish candle formation on daily charts.
The positive momentum and supportive domestic and global cues indicated that if the index surpassed its three-week high of 11,141 touched on August 27 in coming week then there could be fresh rally taking it towards 200-DMA which is placed at 11,200 levels, experts feel.
"Based on weekly and daily formation of Nifty, it is very clear that we are heading higher to hit the level of 200-day SMA which is at 11,200. Strategy should be to add long in large cap and mid cap companies with a final stop loss at 10,940," Shrikant S Chouhan, Senior Vice-President, Equity Technical Research at Kotak Securities told Moneycontrol.
Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote also said Nifty50 has jumped from its oversold levels nearing its resistance levels at 11,150-11,200 which will act as strong hurdle to cross for the bulls. A decisive break above 11,200 will signal the resumption of bull market rally, he added.
F&O Cues
Maximum Put open interest was seen at 10,800 followed by 11,000 strike while maximum Call open interest is at 11,200 followed by 11,300 strike. Call and Put writing were seen at immediate strikes which suggests a limited upside as well as downside in the market but a short term stability and respect of support zones.
India VIX fell by 13.21 percent in the last week from 16.27 to 14.12 levels. Volatility has been falling from recent swing of 18.31 to 13.90 levels in last seven sessions and forming lower highs on daily scale.
VIX suggests some sort of stability and respect of support zones in the broader market and Options data suggests the Nifty could be in a trading range of 10,800 to 11,200 levels, according to experts.
"Falling volatility with rising Put:Call ratio and open interest congestion suggests shifts of support to higher zones and chance of surpassing the key multiple hurdle areas," Chandan Taparia of Motilal Oswal Financial Services told Moneycontrol.
Amit Gupta of ICICI direct expects 10,950 to act as an important support for the index in coming sessions. The Nifty may attempt to move towards 11,200, which is the highest Call base, he said.
Source: moneycontrol.com