NEW DELHI: Bloodbath in forex market and Sino-US trade war tensions kept Dalal Street investors on tenterhooks during the week gone by. Equities kept oscillating between the positive and negative territories, with the bulls eventually winning the battle by a whisker.
Benchmark index BSE Sensex gained 0.2 per cent in the holiday-truncated week to settle at 37,947, whereas the broader Nifty50 index of the National Stock Exchange (NSE) closed at a fresh closing peak of 11,470, up 0.36 per cent.
As the earnings season is over, investors are likely to take cues from trends in global markets and key macro-economics developments.
Sanjeev Zarbade – Vice President – Research, Kotak Securities, sees volatility and macro risks over the next few weeks from potential escalation in US-China trade issues, possible hard sanctions on Iran leading to sharp decline in Iran oil exports and higher crude oil prices and possible EM contagion given Turkeys fragile macroeconomic situation and weak macroeconomic positions of several EMs.
Let's take a look at the key events/developments that may steer market in the upcoming holiday-truncated week. The stock market will be closed on Wednesday, August 22, on account of Bakri Id.
US-China trade talks
According to news reports, China and US are scheduled to hold trade talks on August 21 and 22, just before $16 billion in new US tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing. The announcement has given hopes that they might resolve an escalating tariff war that threatens to engulf all trade between the worlds two largest economies.
Investors to watch rupee
Movement in the domestic currency will be keenly watched by investors. The Indian rupee on Thursday settled below the 70 mark for the first time at 70.16 against the US dollar. Earlier during the day, the local unit hit an all-time low of 70.39. The rupee has been under pressure in the past few sessions due to big meltdown in the Turkish lira. India Ratings has recently revised its currency outlook and now estimates the rupee to average 68.4 against dollar through FY19 (April-to-July average: 67.5 against dollar).
Turkey may sway sentiment
Developments in Turkey will be one of the major factors influencing investors' thinking during the week ahead. The Turkish lira has lost nearly 40 per cent of its value against the dollar this year as investors fret about President Recep Tayyip Erdogan's influence over monetary policy. According to a report by Independent, Turkey's president has accused America of launching an “attempted economic coup” as the countrys currency continues to reel following US economic sanctions. On Friday, ratings agencies Standard & Poor and Moody's downgraded Turkey's credit rating closer to "junk" status, owing to currency fluctuations and concerns over central bank independence.
Nifty charts show bullishness
The Nifty50 index hit an all-time closing high on Friday and made a bullish candle on the daily chart. This also marked the fourth week of consecutive bullish pattern for the index on the weekly scale. "In the near term, 11,495 will be a crucial resistance on the way up whereas on the way down, 11,366 – 11,340 will provide support. Since the index has completed an impulse move on the way up and is in corrective mode, sideways consolidation within 11,340 – 11,495 is possible in the forthcoming trading session," said Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas. "The bulls will take charge once the index breaks and sustain above 11,495. Overall, the short term outlook remains bullish for the target of 11,640 and reversal placed at 11,050," Ratnaparkhi added.
Fed minutes for rate signal
The US Federal Open Market Committee will release the minutes from its July 31-August 1 policy meeting on Wednesday, August 22. The US Federal Reserve had kept interest rates unchanged in its last policy meet but characterized the economy as strong, keeping the central bank on track to increase borrowing costs in September. The Feds decision left its benchmark lending rate in a range of 1.75 per cent to 2.00 per cent.
Look out for stock-specific actions
Infosys: Shares of IT major Infosys are likely to remain in focus when trading resumes on Monday as the company's CFO MD Ranganath has resigned. Ranganath, the key managerial personnel, will continue on his current role till November 16. Infosys said he has decided to step down to pursue professional aspirations and the board has accepted his resignation.
L&T: Larsen & Toubro (L&T) is going to take up a proposal for share buyback next week. The engineering and construction conglomerate on Saturday informed bourses that the board will consider the proposal for buyback of shares on August 23.
PVR: Leading multiplex operator PVR on Friday said it has completed the acquisition of 71.69 per cent share of South India-based chain SPI Cinemas. SPI Cinemas operates 76 screens across 17 properties in 10 cities under several brands such as Sathyam, Escape, Palazzo, The Cinema and S2 Cinema. It reported revenue of Rs 309.6 crore in FY 2017-18.
This apart, movement in crude prices, monsoon outcome, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) will play a key role in deciding market direction in the coming week.