10 key factors that will keep traders busy this week

The market started off July series on a subdued note on Friday, though gained half a percent for the week ended June 28 and snapped three-week losing streak, indicating caution ahead of important event -- Union Budget that scheduled to be released on July 5.

On coming Monday, first the market may react to decision by US President Donald Trump and Chinese President Xi Jinping in G20 Summit held in Japan that both sides would continue negotiations for trade tariffs and will not levy any new tariffs against each other's products for the time being.

After this reaction, the market will shift its focus entirely on Budget and hence it may remain volatile before getting directional move, experts said, adding the rangebound move between 11,600-11,900 levels on the Nifty for last many weeks also indicated that the Street eagerly awaits this key event.

"Markets will react to the outcome of G-20 meet in early trade on Monday and then focus would shift to the upcoming Union Budget. In short, participants should prepare themselves for an eventful week," Jayant Manglik, President - Retail Distribution, Religare Broking told Moneycontrol.

"We advise preferring hedged positions instead naked trades. Investors, on the other hand, can utilise further dip to accumulate quality stocks," he added.

Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote said, "The election outcome is more of an emotional event while the Budget has more rational reactions in the market. The lackluster vibe before the Budget can be the calm before the storm and markets are expected to remain muted and sideways but there is likelihood of downward pressure."

The broader markets outperformed frontliners as the BSE Midcap and Smallcap indices gained more than a percent each in passing week. All sectoral indices closed in green barring IT that fell 1.5 percent.

Here are 10 key factors that will keep traders busy this week:

Union Budget

The Union Budget 2019 is going to be a key event as it is expected give clear direction for the market and economy.

As it will be first Budget from Modi 2.0 government after landslide victory and first budget by new Finance Minister Nirmala Sitharaman, investors are hopeful of some kind of fiscal stimulus and talks of reforms (in sectors like agriculture, infrastructure, rural development, housing etc) from the government to bring slowing economy back on track and maintain fiscal prudence.

Job creation, simplifaction in GST rates and increase in tax collection are other key points to be watched.

"The auto sector is at the tipping point. Depending on how the Government provides support, these stocks will either revive or fall off the cliff. Other sectors which are likely to benefit from the Budget would clearly be low cost housing, agriculture and infrastructure as the Government knows very well the multiplier effect to attain the growth and employment targets," Jimeet Modi said.

Amar Ambani, President & Research Head at YES Securities expects the government to persist with reasonable levels of deficit on the fiscal front, as indicated in their earlier budget. "The FM's reassurance on sticking with the path of fiscal prudence in the years ahead will be equally important."

He said to boost to economic growth, the most pertinent measure would be providing capital buffers like a MSMSE fund, to make liquidity widely available. Big investment stimulus through the budget though, can come only after tax collection rises materially, he added.

Auto Sales

Auto companies will release their June sales data on Monday, hence stocks like Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Hero Motocorp, TVS Motor Company, Bajaj Auto, Ashok Leyland, Escorts, Eicher Motors etc will react.

Monthly sales data has been weakened for more than three quarters now and the trend is expected to be same for June as well due to subdued demand, liquidity crisis, new insurance norms etc, experts said.

"We expect weakness in automobile sales volume to continue in June 2019 amid weak demand outlook," Kotak Institutional Equities said, adding Maruti Suzuki and Tata Motors are likely to show 11 percent and 35 percent degrowth in sales respectively in June YoY.

According to the brokerage, Hero Motocorp and TVS Motor are expected to report subdued growth while Bajaj Auto may get support from exports. In commercial vehicle segment, Tata Motors may show 29 percent decline in sales and Ashok Leyland 16 percent YoY.

Crude & OPEC Meet

Globally after G-20 meet, the key event to watch out for would be OPEC's two-day meeting scheduled to be held on Monday & Tuesday.

The likely continuity in production cut of 1.2 million barrels a day to counter demand growth slowdown is widely expected, but is there any more production cut or not will be key thing to watch, experts said, adding the volatility is likely to be seen in crude oil prices.

"The organization is due to meet on 1st & 2nd July at Vienna to set production levels for the second half of the year. Meanwhile, Saudi Arabian Energy Minister said he was confident that OPEC would extend output cuts into H2 after holding talks with Russia," Jigar Trivedi, Research Analyst- Commodities Fundamental, Anand Rathi Shares & Stock Brokers told Moneycontrol.

At present, OPEC and its allies have a deal to cut crude oil output by 1.2 million bpd from 1st January 2019.

International benchmark Brent crude futures ended marginally lower for the week at $64.74 a barrel due to weakness on Friday.

Rupee Outlook

The Indian rupee appreciated sharply in passing week, tracking positive flows as well as improved risk sentiment towards emerging markets assets. The currency gained 55 paise against the US dollar to close at 69.02.

Experts feel there could be volatility in rupee in the Budget week and the currency could be ranged at 69-70 a dollar.

"The 69.0 strike has seen a build-up in Call and Put positions last week signifying caution ahead of G-20 meet and Union Budget in July first week," Amit Gupta of ICICI Direct said.

Data released by the Reserve Bank of India (RBI) showed the country’s foreign exchange reserves grew by $4.22 billion from $422.20 billion in the week ended June 21, due to foreign fund inflows and weakening US dollar.

Macro Data

Nikkei Manufacturing PMI data for June and Infrastructure Output for May will be released on July 1 while Nikkei Services PMI data will be announced on July 3.

Bank loan & deposit growth for fortnight ended June 21, and foreign exchange reserves data for week ended June 28 will be declared on July 5.

Technical Outlook

The Nifty50 snapped three weeks' losing streak on buying seen in the banking sector and closed half a percent higher. The index formed bullish candlestick pattern with shadows on either side on weekly scale, indicating indecisiveness amongst participants regarding the direction ahead of Union Budget.

Since past 5-6 weeks index is consolidating within broad range of 12,050-11,600 levels representing short term sideways trend, experts said.

"Any eitherside breakout will indictaing further direction. The chart pattern suggests that if Nifty crosses and sustains above 11,880 levels it would witness buying which would lead the index towards 11,950-12,030 levels. However if index breaks below 11,700 level it would witness selling which would take the index towards 11,650-11,550," Rajesh Palviya, Head Technical & Derivatives Research at Axis Securities told Moneycontrol.

For the week, he expects Nifty to trade in the range of 11,950-11,650 with a mix bias.

F&O Cues

Maximum Call open interest (OI) was seen at the 12,000 strike, which will act as a crucial resistance level for the July series, followed by 12,500 and 12,300 strikes while maximum Put open interest was seen at 11,500 strike, which will act as a crucial support level, followed by 11,000 and 11,300 strikes.

Significant Call writing was seen at 12,000, 12,300 and 12,500 strikes while Put writing was seen at the 11,500, 11,300 and 11,600 strikes.

Nifty future rollover data till June expiry is 80 percent which is higher than 3-month average rollover of 77 percent and Long Short Ratio has shot up to 62 percent, indicating FIIs are starting the July series with majority of long positions in the system, experts said.

"Such a shift in stronger hands position ahead of the Union Budget is likely due to the anticipation of positive development during the budget announcement. The volatility index is currently around 15 percent, such low IV’s are again an indication of strength in the market," Sneha Seth, Derivatives Analyst at Angel Broking told Moneycontrol.

Considering above data points, she believes if Nifty holds 11,600-11,650 during the upcoming event, the probability of rally beyond the important psychological figure of 12,000 may increase.

FII and DII

Foreign institutional investors were net buyers last week to the tune of more than Rs 2,000 crore, taking total monthly buying to over Rs 1,000 crore as per data available on Moneycontrol. They are net buyers for fifth consecutive month.

Domestic institutional investors also remained net buyers during the week, taking total buying to over Rs 3,600 crore in June itself.

Whether both will be net buyers or sellers in July will be closely watched by the Street, especially after Union Budget as it will direction to market, experts feel.

Corporate Action

Here are key corporate actions taking place in the coming week:

Global Cues

Apart from G-20 meet, the global key data points to watch out for would be: