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Analysis

Interim budget, macro-data to set course of equity indices – Market Outlook

The week ended on January 25 also witnessed an outflow of foreign funds as FIIs were net sellers to the tune of over Rs 559.31 crore, provisional data on the BSE showed.

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Mumbai, Jan 28 (IANS) Expected sops from the interim budget 2019-20 and fears of over slippage in fiscal deficit will determine the trajectory of the Indian equity market in the coming week.

Market observers pointed out that select industrial production data coupled with stock-specific movement due to the ongoing earnings result season and F&O expiry dynamics will affect investor’s sentiments.

“The upcoming interim budget and RBI’s monetary policy are likely to direct the trend of the market going forward,” SMC Investments & Advisors CMD D.K. Aggarwal told IANS.

“Nifty is likely to trade between 10,750-11,100 levels while Bank Nifty is expected to trade between 26,900-27,700 levels.”

Parliament’s Budget session will kick off from January 31, followed by the interim budget 2019-20 on February 1.

“Traders should anticipate further declines in frontline indices if Nifty breaches 10,700 and the next stop could be 10,500 or lower. Expiry cues and Budget expectation will guide trade this week,” said Sahil Kapoor, Chief Market Strategist, Research, Edelweiss Wealth Management.

According to Geojit Financial Services’ Head of Research Vinod Nair, “Market is likely to extend a range bound movement as the upcoming interim budget and the RBI’s monetary policy are the two major events that could steer market sentiment.

“We do not expect important measures to be announced in the interim budget specifically benefiting stocks and sectors, other than consumption-oriented sectors given the populist agenda. But this ongoing populist risk will reduce post the budget and election.”

Apart from the Budget, the week ahead will be heavily influenced by Q3 corporate earnings and the direction of foreign fund flows.

Companies like Escorts, Piramal Enterprises, Wockhardt, Axis Bank, Bank of Baroda, Housing Development Finance Corp, Bajaj Auto, ICICI Bank, Indian Oil Corp, NTPC, Bharti Airtel, Hero MotoCorp and Dr Reddys Labs are expected to announce their quarterly results in the coming week.

Besides quarterly results, macro-economic data points like Index of Eight Core Industries (ECI) figures and the country’s fiscal deficit data up to December will be keenly watched by investors.

In addition, monthly automobile sales figures and the Purchasing Managers’ Index (PMI) manufacturing data will become other major sentiment drivers.

On the currency front, the rupee is expected to appreciate due to global factors.

“Rupee can appreciate to 70.50 next week on back of soft US Fed tone, after a long depreciation streak which started at 69.24,” said Edelweiss Securities’ Head of Forex and Rates Sajal Gupta.

On a weekly basis, the Indian currency stood standstill at 71.18 against the US dollar at close on Friday compared to last week, after a largely negative trend for most part of last week.

The week ended on January 25 also witnessed an outflow of foreign funds as FIIs were net sellers to the tune of over Rs 559.31 crore, provisional data on the BSE showed.

Last week, disappointing quarterly results and negative global cues pulled the Indian equity market down.

Consequently, the 30-scrip Sensitive Index (Sensex) of the Bombay Stock Exchange closed at 36,025.54 points — down 361.07 points or 1 per cent from its previous week’s close.

Similarly, the NSE Nifty closed lower by 126.4 points or 1.16 per cent to 10,780.55 points.

(Rohit Vaid can be contacted at [email protected] )

Analysis

Eliminated JeM leadership within 100 hrs of Pulwama attack: Army

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Srinagar, Feb 19 (IANS) The Indian Army on Tuesday said within 100 hours of the February 14 Pulwama attack on a CRPF convoy that left 40 troopers dead, it eliminated the Jaish-e-Mohammad (JeM) leadership in the valley that planned and executed the deadly carnage.

This was stated by Lt Gen K.S. Dhillon of the 15 Corps Commander, at a joint press briefing here in Jammu and Kashmir, along with officials state police and the Central Reserve Police Force (CRPF).

He also made it clear that the Pulwama attack was carried out by the JeM, which is based in Pakistan, with active support of the Inter-Services Intelligence (ISI) and the Pakistan Army.

“Within 100 hours of the Pulwama terror attack, we hit the JeM in the Kashmir Valley which was being handled by the Pakistan-based JeM,” Dhillon said.

He also added that the details of the two terrorists and one local conduit who were killed in the operation was shared on Monday.

“The local commanders, most of them Pakistanis, who were in-charge of controlling, coordinating, fabricating and executing the attack on Thursday, were the top leadership of the JeM in the valley,” Dhillon said.

Since the JeM leadership was already being tracked, the Indian operation was launched on Sunday night on specific information of the module.

Giving a stern warning to sympathisers of the terror movement in the state, he said: “Anyone who picks up a gun in Kashmir will be eliminated, unless the person surrenders.”

“I would also like to tell one thing to the parents of the Kasmhiri youths, especially the mothers, as I understand that they have a key role. Through you, I request the sons to surrender and join the main stream,” the officer said.

In the biggest crackdown after the February 14 attack by a suicide bomber that left 40 CRPF troopers dead in Pulwama district, the security forces ringed a militant hideout in Pinglena village, just 10 km from the Thursday’s terror attack site, triggering a gun battle Sunday overnight that continued intermittently till Monday evening.

They killed three militants of the Pakistan-backed JeM, two of them Pakistani nationals identified as Kamran and Abdul Rashid alias Ghazi Umar. Besides, a Major, three soldiers and a civilian were also killed in the initial burst of gunfire by the militants.

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Analysis

Dealings of European missile manufacture under scanner

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New Delhi, Feb 17 (IANS) A leading European arms manufacturer MBDA, which supplies missiles for the Rafale jets, has come under the scanner of probe agencies here for its suspected links with lobbyist Deepak Talwar, who was extradited from Dubai last month.

The country head of MBDA, Loic Piedevache, has been summoned by the Enforcement Directorate to appear before it on Monday in connection with the probe relating to the company’s links to Talwar, who is believed to have steered several deals with Airbus, which holds a stake in MBDA, during the UPA regime, according to sources.

Infrastructure major Larsen & Toubro had entered into a joint venture with MBDA to supply missiles and missile systems to the Indian armed forces.

L&T holds 51 per cent stake in the joint venture, L&T MBDA Missile Systems, and had identified defence as one of the key drivers for achieving growth in the sector.

The sources claimed that apart from questions on the company’s engagement with the Indian forces, Piedevache would also be questioned on the alleged payments to Talwar’s NGO. Advantage India, to the tune of Rs 88 crore between 2012 and 2015, from MBDA and Airbus.

Later, the entire money was said to have been withdrawn in cash by using “fake purchases”, the sources said.

Analysts said this was probably a rare occasion when the India head of a leading international firm was being summoned by a probe agency.

Piedevache has been heading the company’s operations in India for a decade. The Mirage upgrade programme and Rafale were signed during Piedevache’s tenure in India and he could be privy to information, the sources said.

“If required, the probe agency may also summon group export director Jean-Luc Lamothe. First of all, Piedevache would be asked to explain the company’s payments to Talwar’s NGO,” the sources said.

Piedevache could not be reached for his comments. An MBDA spokesperson said the company would support the authorities in their probe. It maintained that it had supported social development initiatives in India as part of corporate social responsibility, which included some payments to the NGO.

The company is involved in the Rs 30,000 crore offset programme associated with the 36 war planes.

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Analysis

Rupee weakened against $ in choppy weekly trade

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Mumbai, Feb 17 (IANS) In a choppy week’s trade, the Indian currency weakened against the US dollar to close above the 71 a dollar mark on Friday, owing to a sharp rise in crude oil prices, turmoil in the equity markets and uncertainty around the US-China trade relations.

In what could translate into further trouble for the domestic currency, analysts see an upward move of 6 to 7 per cent in the Brent crude prices in the coming week.

The rupee lost heavily towards the end of the week – over 70 paise in the last three trading session – as traders reacted to the sanction on Venezuela and production cut by OPEC and Saudi Arabia.

Sajal Gupta, Head Fx & Rates Edelweiss, said “technically … crude now looks set for another 6-7 per cent rise” which would mean that the rupee was likely to depreciate further in the coming sessions. “And if Rs 71.80 per dollar is broken, we can head towards Rs 72.50 mark.”

Among other factors impacting the currency, Gupta said, with crude and dollar index giving breakout, rupee would remain under pressure. Trade deficit data released on Friday post market was also not very encouraging with monthly deficit touching almost 15 billion dollars.

“Political tensions would also remain heightened with key leaders vowing strong retaliation in wake of the biggest terror attack in the Kashmir valley.”

Explaining the factors which has caused volatility, Anindya Banerjee of Kotak said the currency markets largely depend on the capital flows … and right now the fear of a possible retaliation by the government in response to the Pulwama attack is having an affect.

“The context of the whole event is also important because (Lok Sabha) elections are around the corner,” Banerjee said.

Also, the currency losing against the dollar and rising crude oil prices was a double whammy for the bond markets, he added.

On the global front, discussing the factors affecting the currency, Banerjee said, the Chinese economy was very fragile right now and moreover investors were looking for developments in the US-China trade talks.

However, Gurang Somaiya, currency analyst, Motilal Oswal, felt that the rupee was protected from any major weakness as “Foreign Institutional Investment (FII’s) came around good”, especially in February.

According to data from the bourses, FII has seen inflows worth Rs 1,096 crore in February.

India on Friday revoked the Most Favoured Nation Status (MNS) of Pakistan and has warned that more stern actions will follow the attack in Pulwama. Additionally, equity markets have declined for 6 straight sessions showing weak investor sentiments.

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