Markets This Week: Benchmark indices showed exuberance on Friday after the Reserve Bank of India hiked key policy rates on expected lines. Nifty gained over 275 points to close at 17,094, while Sensex climbed more than 1,000 points to end the week at 57,426. On a weekly basis, benchmarks ended in deep red terrain as Nifty and Sensex posted losses of more than 200 and 600 points, respectively.
The coming week is going to be crucial as, on the economic front, market participants will be eyeing the S&P Global Manufacturing, which will be released on October 3, and S&P Global Services PMI which will come out on October 6. Auto and cement stocks will be reacting to their monthly sales numbers at the start of the week. Also in the primary market, an important IPO is lined up. Electronics Mart India has a consumer durables and electronics store under the name of ‘Bajaj Electronics’ and will be entering the primary market to raise up to Rs 527 crore in a price band of Rs 56-59 per share.
On the global front, investors will be eyeing economic data from the world’s largest economy, the United States (US), starting with S&P Global Manufacturing PMI Final on October 3 followed by Balance of Trade on October 5, Initial Jobless Claims on October 6, and finally Unemployment Rate on October 07.
Investment strategist Vinod Nair, Head of Research at Geojit Financial Services said: “An in-line rate hike along with the RBI’s confidence in the economy’s growth momentum aided the domestic market to alter the seven-day losing streak. The decision to retain inflation at 6.70% with a marginal cut but a healthy GDP forecast of 7.0% indicates the resilience of the Indian economy. Although the commentary warned about prevailing risks to the domestic economy from the global economy, the MPC refrained from sounding very hawkish. Continuation of the policy stance as ‘withdrawal of accommodation’ indicates more rate hikes in the future, but data-driven.”
It will be a holiday-shortened week as the market will remain closed on October 5 on account of Dussehra.
Macro Economic Data
Domestic macro data will influence the trajectory of Indian equities. Gross revenue from goods and services tax (GST) in September logged 26% growth YoY, surging to Rs 1,47,686 crore. Also, the manufacturing PMI and services PMI for September due to be released on October 3 and October 6, will have a bearing on the markets.
Auto Sales Data
Monthly sales data by auto companies for September was released on October 1. Mumbai-based Tata Motors reported a 44% YoY jump in its total domestic sales at 80,633 units while Hero MotoCorp reported a 1.95% decline in total sales to 5,19,980 units during the last month as against 5,30,346 units in the same month last year.
The Indian rupee appreciated by 50 paise against the US dollar after the RBI move, the rally in equity markets and a drop in the greenback. On weekly basis, however, the Indian currency weakened by 36 paise to settle at 81.35 after slipping to a record low of 81.95 against the dollar during the week.
The rupee, which depreciated by 221 paise in the last two-and-half-week, is expected to remain within the broad range of 80-82 levels in the coming days.
“We expect the rupee to trade with a positive bias on a jump in domestic equities and rise in risk appetite in European markets. A weak US dollar and overall weak tone in crude oil prices may also support the rupee. However, concerns over global economic recovery may cap a sharp upside,” Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas said.
With rising bond yields and further policy tightening, foreign institutional investors (FIIs) have once again started withdrawing money from India. They net sold nearly Rs 15,900 crore worth of shares last week, taking the monthly outflow to over Rs 18,300 crore against Rs 22,000 crore of buying in the previous month.
The mood at FII desk will be watched and if the outflow continues, the upside may be restricted in the coming weeks, experts said.
Domestic institutional investors managed to make up for the FII outflow, buying more than Rs 14,000 crore worth of shares in the passing month.
Investors will also track crude prices, as oil traded below $100 a barrel in September and remained volatile amid rising recession fears, which raised concerns over the demand outlook. A Reuters report said OPEC+ may cut crude output at its meeting on October 5.
International benchmark Brent crude futures fell a $1 barrel during the week to settle at $85.14. The price corrected 26 percent in the September quarter.
Nifty Technical Outlook
Market Watcher Rupak De, Senior Technical Analyst at LKP Securities said: “Nifty snapped its losing streak as the index posted a gain after seven consecutive days of correction. On the lower end, it found support at 16800 and moved up. On the daily chart, the index has formed a bullish engulfing pattern. The daily RSI is seen to be entering the bullish crossover. Going forward, the trend may remain bullish with an upside potential of 17300/17500. On the lower end, 16950/16800 may continue to act as crucial support for the short term.”
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