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Results, rates and rupee to drive market trends

Mumbai: Key macro-economic data points on industrial production and inflation rates along with the commencement of the quarterly result season will determine the movement of equity indices next week, analysts opined.

According to market observers, even the direction of foreign fund flows and the rupee’s movement against the US dollar on the back of budgetary announcements, will impact investors’ risk-taking appetite.

“The market was hoping for supportive actions from the government which was not provided in the budget. This was undoubtedly due to the bleak fiscal position given the slowdown in domestic and global market,” said Vinod Nair, Head Of Research at Geojit Financial Services.

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“The lack of incentive for investing in equity will make the market lackluster in the short-term. From here onwards, the market will start to react as per the actual performance of Q1FY20.”

The week ahead will be heavily influenced by Q1, 2019-20 corporate earning results. IT major Tata Consultancy Services (TCS) is expected to be the first bluechip firm to come out with its Q1 result on July 9.

Other companies like Infosys, IndusInd Bank, Hathway and Karnataka Bank are also expected to announce their Q1 earning results in the coming week.

“… the path of revival in PSB profits stays intact (due to the Budget announcements) and would contribute substantially to FY20 earnings. Our earnings outlook for FY20, with 30 per cent growth in NSE 500 PAT stands reinforced,” said Sahil Kapoor, Chief Market Strategist, Edelweiss Investor Research.

“Based on such earnings, the broad markets look attractive at current levels. Thus, we expect Nifty to rise from 13,000 to 13,500 and Mid-cap 100 index to 25,000 in the next 12 months.”

Besides, investors will look forward to the macro-economic data points. The Central Statistics Office (CSO) is slated to release the Index of Industrial Production (IIP), Consumer Price Index (CPI) on July 12.

Similarly, factors such as the rupee’s movement against the US dollar on the back of government’s plans to go in for a sovereign bond issuance will be other major theme for the week.

The Indian currency had strengthened by 59 paise during the week ended July 5, to close at Rs 68.43 against the US dollar from its last week’s close at Rs 69.02.

“Expect rupee to test 68 in coming week and would be interesting to see the trade deficit numbers which are on rise and is a cause of concern,” said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.

“Rupee was volatile last week and flirted with 68.80 level and finally closed at 68.42 at the strongest point of last four to five months.”

On the market charts, the NSE Nifty50 might slide further, if the indices goes below the immediate support level of 11,775 points.

“Technically, with the Nifty failing to sustain at the highs and correcting, traders need to adopt a cautious approach towards fresh longs,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

“Further down sides are likely once the immediate support of 11,775 is broken. Any pullback rallies could find resistance at 11,911.”

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