Market this week: RBI policy, auto sales among 10 factors that will keep D-Street on its feet

This week will see investors keeping an eye on key events: the Monetary Policy Committee (MPC) announcing the outcome of its meeting and automobile sales data.

On the global front, investors will continue to watch trade war concerns along with movements in the dollar-rupee.

Last week, benchmarks continued with their negative streak, with the Nifty ending the first day of October series below the 11,000-mark.

Both key indices recorded their fourth straight weekly fall. The Sensex lost 614.46 points, or 1.67 percent, and the Nifty dropped 212.65 points, or 1.91 percent, last week.

At the close of market hours on Friday, the Sensex closed 97 points lower, or 0.2 percent, at 36,227.1. The Nifty ended down 44.4 points, or 0.4 percent, at 10,933.1. The market breadth is negative as 526 shares advanced, against a decline of 2,101 shares, while 159 shares remained unchanged.

“The market started the October series on a weak note as the Nifty lost nearly half a percent amid volatility. Moreover, stocks fell sharply across the board. It started with a decline in select banking and NBFC counters and later engulfed others sectors too,” Jayant Manglik, President of Religare Broking, said.

Sentiment remained weak on the back of a weak rupee, high crude oil prices and liquidity concerns. Investors were also reluctant to make fresh bets ahead of MPC policy meeting this week, brokers said.

Here are 10 things that investors will watch out for this week.

All eyes are on the meeting of MPC meeting lined up this week. The committee will announce the outcome of the meeting on October 5.

According to a Reuters poll, it is likely to raise interest rates in early October, despite relatively tame inflation, to prop up a falling rupee.

Two-thirds of the 61 economists polled between September 19 and 25 said the RBI would lift the repo rate at least once by the year-end.

Slightly over half said the MPC would deliver a 25 basis points rise to 6.75 percent, with one economist calling for a 50 bps rise.

The Street could take note of the trajectory and comments by the central bank.

The week will see resumption of the initial public offering (IPO) of Dinesh Engineers. The issue opened on September 28 and will close on October 3. On Day 1 of the issue, it was subscribed 5 percent.

The IPO looks to raise Rs 185 crore and has an issue size of 10 crore shares. Price band for the offer has been set at Rs 183-185 per share. Hem Securities is manager to the offer.

Auto companies will also be declaring their sales data for September. August was largely mixed as automakers grappled with floods in Kerala during the festive season of Onam, which could have impacted sales. Investors will watch out for these trends to gauge if growth is back on track.

They could also be keeping an eye on a stock such as Maruti Suzuki, which has reportedly offered discounts in September. Hence, its margin could come under pressure.

Brokerage house Motilal Oswal expects moderate retail sales in the passenger vehicle and two-wheeler segments. It sees robust commercial vehicle (CV) sales.

"Rain deficiency in key markets like Bihar (-21 percent), Haryana (-22 percent), Uttar Pradesh (-9 percent) and Gujarat (-27 percent) is impacting rural incomes, and in turn, retail. The need for upfront payment of insurance cost, the inauspicious ‘Shradh’ period and rising fuel costs, too, impacted buying decisions in rural areas," the research house said, adding the demand momentum in 2W is mixed.

Stocks in News

Bandhan Bank: RBI froze remuneration of MD & CEO till further notice.

Indian Hotels: Taj Mansingh auction won by the company.

Karnataka Bank: Raised deposit interest rates by 10 basis points.

Engineers India: The firm has bagged an order over Rs 5,000 crore from HPCL Rajasthan.

Vijaya Bank: Board approves its merger with Bank of Baroda and Dena Bank.

Yes Bank: The lender has assigned its credit exposure in Jaypee Cement to assets care

Hindustan Zinc: It has extended its tenure of CEO till 2020

BPCL: The Board approved Rs 11,130 cr Kochi petchem project.

Kalpataru Power: The firm bagged orders worth Rs 1,145 crore.

Action Construction: Reappointed Vijay Agarwal as chairman and managing director, along with Mona Agarwal and Sorab Agarwal as executive director.

Suven Lifesciences: CARE Ratings has upgraded its short and long term bank facilities and maintained the outlook to be stable in case of latter.

Darjeeling Ropeway: The firm declared a dividend of Rs 0.25 per equity share of paid-up value of Rs 10 apiece.

Jagan Lamps: Hemant Mangla, Ruchi Agarwal and Saras Kumar have been appointed as independent directors.

The controversy surrounding Infrastructure Leasing & Financial Services (IL&FS) will also be in focus. At its AGM over the weekend, the management told shareholders that State Bank of India (SBI), Life Insurance Corporation (LIC) and Japan's Orix will likely participate in a rights issue worth Rs 4,500 crore.

Having said that, overall weakness in NBFCs as well as marquee names such as Yes Bank will also be in focus. These have been dragging the market

The development comes a day after NS Vishwanathan and MK Jain, Deputy Governors of the Reserve Bank of India, met representatives of LIC, the single largest owner with 25.34 percent stake, and Orix Corporation, which owns 23.54 percent stake, and reportedly asked them to ensure the systematically important NBFCs do not go belly up.

The engineering and infrastructure lending conglomerate owes over Rs 91,000 crore to lenders, but has been on a defaulting spree since August 27. So far, it has failed to make payments as many as nine times.

Movements in the dollar-rupee as well as international Brent crude prices will be on investors’ radar given their adverse impact on the market in the last couple of months. The currency has been dangerously hovering close to Rs 73 per dollar mark, while crude hit $82 per barrel. With countries looking to reduce dependence on Iran for oil due to sanctions imposed by the US, there are supply deficit issues, which has been pushing prices higher.

India has tried to keep a neutral stance and is hoping for a solution to continue to import oil from Iran, which is a cheaper option.

The market continued its southward journey for third consecutive day on Friday and closed in the red in eight out of the last nine sessions. On the monthly chart, it registered a long bearish candle which resembles a Bearish Engulfing pattern.

A detailed study of the Nifty from smaller to larger time frame charts (daily to quarterly) indicates a sharp downtrend and formation of an important top reversal pattern.

HDFC Securities said that though the Nifty is placed at the key lower support of 10,900-10,850 levels, it is unlikely to see any significant upside bounce from this level. It expects a maximum upside of 11,150-11,200 levels for October.

“The downside momentum in the market could strengthen further on a decisive move below the key support of 10,850. The multi-month downside target for the Nifty could be at 9,875 levels (38.2% Fibonacci retracement of larger degree), which could be achieved in the next 1-2 quarters (3-6 months),” analysts at the firm said in a recent report.

This week will see investors keeping an eye on developments around the US-China trade war. Both nations have continuously imposed import tariffs, which has resulted in a trade war and spooked global markets.

Last week, US’ imposition of tariffs on $200 billion worth of goods came into effect, which initially rattled the market.

According to agency reports, China warned that its critical relationship with the US could break 'like a glass'. Chinese Foreign Minister Wang Yi insisted that his country 'will not be blackmailed' or bow to pressure. "Protectionism will only hurt oneself, and unilateral moves will bring damage to all," he told the UN General Assembly gathering of world leaders.

Apart from trade war concerns, traders will watch out for monthly economic data such as Purchasing Managers’ index for Japan, US and Europe which will be out on Monday. The US will also release its jobless data too.

In India, manufacturing and services PMI will be announced along with auto sales as well as outcome of the RBI policy meet.

With no major annual general meetings or board meetings lined up ahead of the onset of earnings later in October, corporate action will be a subdued one. Goa Carbon is likely to be in focus as it declares its result on October 5.