Market Week Ahead: RBI policy, auto sales, IPOs among 10 factors that will keep investors busy

Moneycontrol News

The market witnessed a correction for second consecutive week, with the Nifty losing 1.8 percent on the back of fiscal deficit woes, high crude oil prices and negative global cues. The index attempted to bounce back in latter half of the week but profit booking ahead of a long weekend and the RBI policy meet next week erased those gains.

The Nifty lost 3 percent in two weeks to close at 9,788.60 and nearly 4 percent from its all-time high of 10,178.95 recorded on September 19.

Despite this correction, the market is not yet reasonably valued because of expectations of continued GST disruption in September quarter earnings and weak economic growth, experts feel.

According to them, the market has not bottomed out yet. They expect some consolidation with negative bias for some more time before a return to recovery mode.

The Nifty is expected to be in range of 9,700-9,900 in the coming week, say experts.

A recovery is possible only if there is some kind of surprise in September quarter earnings scheduled be announced starting the second week of October, experts said, adding the monetary policy could be a non-event for the market owing to an unlikely rate cut.

"Markets are currently dealing with several issues and we feel further correction is inevitable. However, the pace of decline could be gradual from hereon but that would be more painful for the traders," Jayant Manglik, President, Retail Distribution, Religare Securities said.

He suggests continuing with sell on rise approach and preferring index majors for short term trades.

Vinod Nair, Head Of Research at Geojit Financial Services said, "On the backdrop of lackluster domestic macros, likelihood of extension of GST disruption and continued impact on corporate earnings, the current domestic premium valuation will not sustain and we expect consolidation to continue in the near term."

The tailwinds enjoyed by the domestic economy due to benign commodity prices and falling inflation has currently started to reverse, he added.

Experts advise buying on every further correction and rebalancing portfolio in order to catch the next upsurge.

"We believe the index is undergoing a secondary corrective phase that forms part of the larger degree uptrend, therefore, investors should utilise this as an opportunity to accumulate quality stocks in a staggered manner," Dharmesh Shah – Head-Technical at ICICI Direct.com Research said.

Globally, "going ahead, we expect the focus to shift to unwinding of balance sheet by Federal Reserve and oil prices trend," Teena Virmani, Vice President-PCG Research at Kotak Securities said.

There will be four trading sessions in the coming week as the market will remain shut on Monday for Gandhi Jayanti.

Here are 10 things that will keep investors busy next week:-

RBI Policy

The Monetary Policy Committee meeting is scheduled for October 3 and 4.

The Reserve Bank of India is widely expected to maintain status quo in the forthcoming monetary policy review, citing higher inflation risks and weak credit demand, but the commentary will be closely watched.

"With the repo rate at present at 6 percent, there may be room for further monetary easing. However, we do not expect a rate cut in the upcoming policy review, as CPI inflation is expected to chart an upward trajectory over the coming months, and print between 4.5 and 5 percent in March 2018," ICRA managing director Naresh Takkar said.

Retail inflation rose to a five-month high of 3.36 percent in August from 2.36 percent in July.

Auto stocks

On Tuesday, auto stocks will react to the September sales data that will be announced on October 1.

The Auto index already rallied 1 percent on last Friday on hopes of good sales numbers.

Macro Data

The data for Nikkei Manufacturing PMI for September will be announced on Tuesday and Services PMI data on Thursday.

Factory activity had unexpectedly expanded in August while services activity had contracted for a second straight month in August on weak demand.

The Nikkei/Markit Manufacturing Purchasing Managers' Index rose to 51.2 in August from 47.9 in July while Nikkei/IHS Markit Services Purchasing Managers' Index rose to 47.5, up from July's 45.9 but still below the 50 mark that separates expansion from contraction.

FIIs flow

In the passing week, FIIs continued to be net sellers to the tune of Rs 9,078.71 crore in the Indian Equities. However, DIIs gave good support with positive flows, pouring in Rs 11,666.6 crore worth of funds.

FIIs have been regularly selling in cash segment since September 19. Their higher selling figure of Rs 5,000 crore on September settlement has close to Rs 2,400 crore of Nifty rebalancing figure, ICICIdirect said.

"Result season is approaching and in our opinion FIIs would come back with positive flows if results are in line with expectation. One needs to closely watch FII flows going ahead," Anita Gandhi, Whole Time Director, Arihant Capital Markets said.

Technical View

Technically, the Nifty is expected to be in range of 9,700-9,900 in the coming truncated week, suggest experts. According to them, if it breaks 9,700 decisively then it can fall up to 9,600-9,500 levels.

Nifty as per daily and weekly timeframe has placed at the important support around 9,700-9,685 levels and made attempts to show upside bounce.

Hence, the maximum upside levels to be watched on any upmove could be up to 9,950-9,980 levels, for the next one or two weeks, Nagaraj Shetti, Technical Research Analyst, HDFC Securities said.

According to Dharmesh Shah of ICICI Direct.com Research, the Nifty is expected to hold the 9,650-9,700 support base in the present scenario and extend the ongoing consolidation between 9,650 and 10,000 levels over the coming weeks.

F&O

The Nifty started off the October series on a flat note on Friday as the morning rally was offset by late profit booking.

Maximum Call open interest (OI) of 48.37 lakh contracts was seen at strike price of 10,000 which will act as a crucial resistance level for the index in October series while maximum Put OI of 35.22 lakh contracts was seen at strike price 9,700 which will act as a crucial base for the index in October series.

Looking at the increased Call activity at 9,900 strike, the immediate range is 9,700-9,900 for Nifty, ICICIdirect said.

IPO and Listing

SBI Life Insurance Company will list its equity shares on the exchanges on Tuesday. The issue price is fixed at Rs 700 per share.

The Rs 1,157-crore IPO of Godrej Agrovet will open for subscription on October 4, with a price band of Rs 450-460 per share. It consists of fresh issue of up to Rs 291.51 crore, offer for sale of up to Rs 300 crore by Godrej Industries and up to 1.23 crore equity shares by V-Sciences Investments Pte Limited. The issue will close on October 6.

MAS Financial Services' initial public offering will open on October 6 and close on October 10. The price band is fixed at Rs 456-459 per share. The issue consists of fresh issue of up to Rs 233 crore and offer for sale of up to Rs 227.04 crore by selling shareholders.

Corporate Action

On Tuesday, KS Oils will announce its earnings for the quarter ended March 2017 and Sanwaria Consumer will release earnings for July-September quarter.

Stocks in Focus

With the RBI policy next week, banking stocks are expected to be in focus. The policy may provide some insights on growth prospects post GST implementation and monetary policy actions, Amit Gupta of ICICIdirect feels.

Cadila Healthcare is expected to open higher on Tuesday as Zydus received final approval from the USFDA for Doxycycline. The drug is a broad spectrum antibiotic and will be manufactured at a formulations manufacturing facility at Moraiya, Ahmedabad.

Dr Reddy's Laboratories may also start the week on a positive note as it launched Sevelamer Carbonate tablets (generic version of Renvela) in the US market. For the last 12 months ending in July 2017, the drug had US sales of approximately USD 1.88 billion.

Tata Motors will be in focus as Energy Efficiency Services Limited will procure 10,000 electric vehicles from the company. It will supply electric vehicles in two phases: the first 500 cars in November and the rest in the second phase.

DLF will react positively to the shareholders' approval for the promoters' decision to sell their entire 40 percent stake in the rental arm (DLF Cyber City Developers) for Rs 11,900 crore.

FMCG major Hindustan Unilever will react to the news saying it has decided to divest 50 percent stake in joint venture Kimberly-Clark Lever (KCLL) to its partner Kimberly-Clark Cooperation(KCC).

In the aviation space, InterGlobe Aviation will be in focus as a media report suggested that Capital International is picking up a 40 percent stake in its subsidiary InterGlobe Technology Quotient while budget carrier SpiceJet has placed an order for Bombardier's 50 turboprop jets valued at USD 1.7 billion.

PNC Infratech will also open higher on Tuesday as it is a lowest bidder for the project of 145-km long six laning of Chakeri to Allahabad section of NH-2. The bid project cost was Rs 2,159.0 crore.

Global Cues

China on Saturday cut reserve requirement ratio for banks involved in lending to agri & small firms, which will be effective from 2018.

Japan, Europe and US' Manufacturing PMI data for September will be released on Monday while the eurozone Markit Composite PMI data for September will be announced on Wednesday.

In the US, factory orders data for August will be released on Thursday and non-farm payrolls data for September on Friday.