Market week ahead: 10 key things that will keep traders busy

After a sharp fall of 2 percent in the week-ended May 18, the market has been inching up gradually for fourth consecutive weeks. The Nifty has been trading a tight range of around 300 points (10,500-10,800 levels).

Benchmark indices gained half a percent this week, taking the total upside to a little over 2 percent in four straight weeks. The Sensex ended at 35,622.14 and the Nifty at 10,817.70. The BSE Midcap index underperformed, falling 0.1 percent.

Stabilisation in crude oil prices, hopes of a normal monsoon and earnings growth ahead, and positive growth environment in India as well as globally are supporting the market. Weakening rupee-dollar, gradual increase in inflation, likely hardening of interest rates globally and US-China trade war fears are some concerns that may cap major upside.

Experts expect the market to consolidate in the coming week but the trading range could be widened on the upside. They feel that in the absence of domestic events, the market may look for triggers globally.

Investors will slowly shift their entire focus to June quarter earnings that will begin next month, experts said.

"The week was marked by important meetings of central banks with the Federal Open Markets Committee hiking interest rates by 25 bps, the European Central Bank signalling an end to the bond purchases by December end, and the Bank of Japan maintained its ultra=loose monetary policy. Rising interest rates in the US and expected increase in interest rates from 2019 may weigh on the foreign portfolio inflows going forward," Teena Virmani, Vice President – Research at Kotak Securities told Moneycontrol.

Going forward, she feels the markets would weigh concerns emanating from a possible trade war between the US and China. "Higher interest rates have resulted in the valuation multiple contracting. Going forward, gains in the market would largely hinge on an earnings recovery."

She sees higher crude prices and minimum support prices impacting inflation and interest rates along with the widening fiscal and current account deficit. "Positives are likely to come from a 'non-disrupted' year, earnings recovery, expectations of a third consecutive normal monsoon as well as strong rural consumption."

Jayant Manglik, President, Religare Broking, said with the lack of any fresh positive domestic triggers in the near term, volatility is likely to remain high with stock-specific movement. “Market participants will closely monitor global developments, especially in the US, Europe and China."

He continues to remain cautious on the markets in coming sessions and advises investors to use any further correction in quality counters as a good buying opportunity.

Here are 10 key things that will keep traders busy next week:

Oil prices corrected sharply in the last one month, especially after hitting $80.50 a barrel, the highest level since November 2014. Increase in US crude production and likely increase in crude output from the worlds biggest oil producers dampened investor sentiment.

Brent crude futures, the international benchmark for oil prices, corrected $7 per barrel, or 8.77 percent, in last one month to $73.44/bbl from $80.50/bbl hit on May 17. On Friday, it fell more than $2/bbl ahead of the Organisation of Petroleum Exporting Countries' (OPEC) meeting in Vienna on June 22-23.

Brent crude lost nearly 4 percent in the week gone by, as experts feel OPEC, Russia and other allies are likely to consider an increase in crude output in their meeting next week.

Fall in crude oil prices is always positive for country likely India which imports more than 80 percent of its oil requirement and companies which are directly or indirectly depend upon it.

The rupee ended at a fresh three-week low of 68.01 against the dollar on Friday amid global trade war concerns and higher-than-expected widening of the country's trade deficit in May. It fell 51 paise against the greenback this week to end at its lowest level since May 24.

The Indian currency was the hardest-hit among Asian currencies which suffered due to a strong dollar and emergence of macroeconomic challenges. A rapid surge of capital outflows and the associated volatility also piled pressure on the currency.

Cautious experts expect the trade war and faster-than-expected tightening of the US monetary policy to have a substantial impact on the Indian economy.

"FPIs continued to be net sellers in Indian markets. Going forward rising inflation and a weakening rupee are posing concern for Indian equities," Anita Gandhi, Whole-Time Director at Arihant Capital Market, said.

Foreign institutional investors have been net sellers, so far, in June. They sold equities worth around Rs 1,800 crore during the month after selling more than Rs 11,000 crore in the previous two months.

But experts feel there is nothing to worry as domestic institutional investors continue to support equity markets. DIIs have been net buyers since April last year. In June so far, they purchased more than Rs 6,000 crore worth of shares as per provisional data on the National Stock Exchange.

The Nifty ended the week at 10,817.70, after hitting a high of 10,893.25 and a low of 10,755.40.

Experts advise traders to remain cautious in the coming week as the markets are likely to remain volatile.

"Nifty patterns on multiple timeframes show it finished off the week with an Inverted Hammer candle, which implies a lack of confidence among traders and investors. It show selling pressure is on a rise around its critical resistance of 10,900. Hence, staying cautious on a rise is advised for the coming week as well," Stewart & Mackertich said in a recent note.

However, as the broader pattern suggests, the primary uptrend is still intact and a retracement towards critical supports is likely to be bought in for the next leg of upmove. Downside critical supports are placed around 10,740, 10,700 and, 10,670, the brokerage added. "As the trend suggests, Nifty broader trading range for the coming week is expected to be 10,880 to 10,670."

Nagaraj Shetti, Technical Research Analyst, HDFC Securities, feels the underlying trend in the Nifty continuous to be choppy. "Minor upmove is expected during next week, but the Nifty is unlikely to sustain the highs in coming sessions."

According to him, the formation of lacklustre type patterns and a presence of key resistance on the weekly chart could dampen effort of the bulls to sustain the highs. "Key overhead resistance to be watched for next week is at 10,900 levels."

Volatility is likely in the coming couple of weeks due to expiry of June derivative contracts. Options data indicated that a trading range for the coming week could be 10,700 (crucial support levels) to 10,900 (the crucial resistance) zone.

"Put writing was witnessed in out-of-money strikes with support for the Nifty gradually shifting higher. Highest open interest for Nifty in the current series is placed at 11,000 CE and in 10,700 PE which was previously placed at 10,600 PE," Rahul Sharma, Senior Research Analyst, Equity99 told Moneycontrol.

Maximum put OI was seen at 10,700 and 10,600 strike, while maximum call OI was at 11,000, followed by 10,800 strike.

Put writing was seen at 10,700 followed by 10,800 strikes, while call writing was seen at 10,800 and 11,000 strikes.

Foreign exchange reserves data for the week-ended June 16, and deposits & bank loan growth numbers for the week-ended June 9 will be released on Friday.

After a nearly three-month lull in the IPO market, the first two public issues - Fine Organics and RITES - of financial year 2018-19 will hit the capital markets in the coming week.

The government will kick start its divestment process for FY19 through the initial public offer of railways consultancy firm RITES, which will open for subscription on June 20. The Centre aims to garner about Rs 460 crore through the 12 percent stake sale. The price band for the issue has been fixed at Rs 180-185 a share.

Speciality chemicals manufacturer Fine Organic Industries would be the second company to open its Rs 600 crore public issue on Wednesday, with a price band of Rs 780-783 per share. The public issue comprises an offer for sale of 76,64,994 equity shares by the promoter group.

Both public offers will close on June 22.

Dr Reddy's Laboratories defends its right to launch Buprenorphine and Naloxone sublingual film in the US markets. A New Jersey District Court has issued a temporary restraining order against the company on Suboxone generic. The court has scheduled an expedited hearing of the preliminary injunction for June 28 and a ruling is expected soon thereafter.

NBCC submitted a bid in response to Department of Investment and Public Asset Management's invite for strategic disinvestment of HSCC and Engineering Projects (India).

After inauguration of its Angul plant, Jindal Steel & Power told CNBC-TV18 that the company may look at expansion of steel plant at Angul in Odisha once it is debt free. It already has land to expand production by 12 mtpa at Angul.

PNC Infratech: The Uttar Pradesh government has cancelled the on-going bidding process of Purvanchal Expressway Project that comprises eight individual packages and decided to go for fresh bidding. The company was earlier declared as L1 bidder for the fourth package of the above project.

Punjab & Sind Bank raises one-year MCLR to 8.6 percent from 8.5 percent with effect June 16.

Panacea Biotec along with its partner, Apotex Inc and Apotex Corp have entered into a settlement agreement with Celgene Corporation (USA) and its subsidiary Abraxis BioScience, for settlement of disputes regarding patents covering Abraxane drug product and the company's abbreviated new drug application (ANDA) for paclitaxel protein bound particles for injectable suspension, 100mg/vial, a generic version of Abraxane.

SMS Lifesciences India has received Establishment Inspection Report from the US Food and Drug Administration for manufacturing facility - Unit-I, Kazipally, Hyderabad, after its inspection in April.

Nava Bharat Ventures: Subsidiary Nava Bharat Energy India has scheduled capital overhaul (for turbine and boiler) of its 150 MW power plant at Paloncha, Telangana, for a period ranging from 45 to 60 days commencing from June 17.

Filatex India has fixed June 28 as record date for determining shareholders entitled for sub-division of equity shares.

Container Corporation of India has fixed June 27 as record date for the purpose of sub-division of shares.

Ujjivan Financial Services has received Reserve Bank of India’s approval for appointment of Ittira Davis as MD and CEO of the company effective July 1.

Electrosteel Steels board allotted 1,76,55,06,078 fully paid up equity shares of Rs 10 each to Vedanta Star (VSL) on a preferential basis. VSL holds 90 percent of the paid up share capital of the company.

Fiberweb India said the proposed preferential allotment of equity shares to New Horizon Opportunities Master Fund to the tune of Rs 40 crore will not be taking place. The company continues to be on track to execute the second phase of its diversification project - production of bi-component flat bond fabric - for which the proposed investment was sought.

KDDL’s board has approved raising funds up to Rs 20 crore through a preferential issue.

Globalspace Technologies acquires strategic stake of 70.80 percent in Miljon Medi App.

Shreyas Shipping & Logistics' associate company Avana Logistek filed its draft red herring prospectus with the Securities and Exchange Board of India for its initial public offering. The issue consists of a fresh issue of Rs 300 crore and an offer for sale of up to 43 lakh equity shares by Transworld Holdings, Mauritius, the promoter of Avana.

ANG Lifesciences India: ICRA has assigned a credit rating for the Rs 17 crore line of credit. The agency has upgraded its long term rating to BB+ from BB- and the short-term rating to A4+ from A4.

On Monday, Japan's Balance of Trade and US Housing Starts data for May and Euro Area Current Account data and Construction Output for April will be announced on Tuesday.

Japan's All Industry Activity Index data for April, minutes of Bank of Japan's May monetary policy meet on June 15, and US Existing Home Sales for May and current account Q1 data will be declared on Wednesday.

On Thursday, US Initial Jobless Claims for the week-ended June 16 and Euro Area Consumer Confidence Flash data for June will be released.

OPEC and Eurogroup meeting organised by European Council meeting are likely to be held on Thursday.