Sunday, May 20, 2018

Top 6 factors that may guide market direction in week ahead

NEW DELHI: The high-voltage political drama in Karnataka, surge in US bond yields and rising crude prices broke the back of the bulls last week, which saw domestic equities posting their biggest weekly loss in 10 weeks. 

On Friday, the Sensex slipped below the crucial 35,000 level to settle at 34,848, down 301 points or 0.86 per cent. NSE Nifty ended below the 10,600 level at 10,596.40, down 86 points or 0.81 per cent. On a weekly basis, both the indices lost 2 per cent each. 

Going by the buzz on Dalal Street, here's a look at the key events that are likely to influence market in the coming week: 

Next batch of Q4 earnings 
Among notable names, Colgate-Palmolive (India), Just Dial and Mahanagar Gas are scheduled to announce their March quarter results on May 21, 2018. Andhra Bank, Bata India, Cipla, Dr Reddy's Labs, IOC and State Bank of India are expected to unveil their score cards on May 22, 2018. 

Godrej Industries, Grasim Industries, Jet Airways and Tata MotorsNSE -3.27 % will announce January-March results on May 23, while Gail, Glaxosmithkline Pharma and MOIL will  will announce theirs on May 24. Bank of Baroda, BEML, Cadila Healthcare, Engineers India, Hindustan Copper, NBCC, Sun Pharma and Tech Mahindra are slated to announce results on Friday. 

BJP’s Karnataka debacle 

Analysts say market may see a knee-jerk reaction to BJP’s Karnataka debacle when trading resumes on Monday. In a dramatic turn of events, BS Yeddyurappa, who took oath as the Chief Minister on Thursday, resigned on Saturday, after he failed to secure the magic number of 112 required to form the government. 

G Chokkalingam, founder and CEO, Equinomics Research & Advisory said it was just a political setback and it may not have any major implication for the market. 

"What matters to the market is whether the ruling government will come back to power in 2019. To that extent, BJP has already doubled its seats in Karnataka. The outcome will have only a knee-jerk reaction," Chokkalingam added. 

Indostar Capital listing 
NBFC Indostar Capital Finance, which recently concluded its initial public offer, will make stock market debut on Monday. 

The Rs 1,844-crore IPO was subscribed 6.80 times during May 9-11. The price band of the offer was fixed at Rs 570–572 with a face value of Rs 10 per share. Indostar is mainly into offering structured term financing solutions to companies and loans to SME borrowers. 

Crude prices 
Oil prices posted their sixth straight weekly gain after touching $80 a barrel earlier this week. However, both Brent and West Texas Intermediate crude slipped in Friday’s trade, paring weekly gains. 

Global prices have been supported this week by concerns over US sanctions against Iran, shrinking stockpiles and production shortfalls in Venezuela, Bloomberg reported. 

“Oil prices are in overbought territory, which has prompted some profit taking,” Reuters reported quoting Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London. 

Spike in oil prices raises India's import bill as the country imports majority of its crude requirements. A weak rupee raises the cost of importing crude oil. 

What do the tech charts say 
The Nifty50 index on Friday formed a 'Bearish Belt Hold' candle on the daily chart, suggesting that the bears were in the driver’s seat right from the beginning. The index sent out a sell signal on the MACD chart after falling 124 points over three consecutive sessions. 

It dropped below its five-day and 13-day exponential moving averages (EMAs), suggesting that more downside could be in the offing. For now, a key level to watch out will be 10,725, a breach below which may extend the ongoing correction towards 10,620 and 10,600 levels. The upside hurdle is seen at 10,785 level, said Chandan Taparia of Motilal Oswal Securities. 

Global cues 
The minutes to the Federal Reserve’s May monetary policy meeting will be released on Wednesday. The Federal Reserve left its target range for the federal funds rate steady at 1.5-1.75 per cent during its May 2018 meeting, in line with market expectations. 

This apart, the next round of Brexit talks will take place in Brussels on Tuesday. The UK Prime Minister Theresa May said on Thursday that Britain would leave the EU customs union after Brexit, but a source said London was considering a backstop plan that would apply the bloc’s external tariffs beyond December 2020, Reuters reported. 


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