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    US stimulus, macros cues among eight factors likely to drive market next week

    Synopsis

    Domestic retail and wholesale inflation data for July and factory output print for June will be out during the week. Rising US-China tension can also emerge a market mover.

    Stock-market-6---GettyGetty Images
    Fast rising Covid-19 cases are creating headwinds for an already fatigued market.
    NEW DELHI: With RBI's money policy review out of its way and Covid-19 cases continuing to multiply as record rate, marketmen on Dalal Street will focus on the evolving pandemic situation, remaining June quarter earnings, signs of progress on a fresh stimulus package in the US and domestic macro data.

    Domestic retail and wholesale inflation data for July and factory output print for June will be out during the week. Rising US-China tension can also emerge a market mover.

    “The domestic market might seem immune to the global unrest, which is at an all-time high. India may not be impacted for the time being, but a possible fallout on the economy still remains an overhang. Bleak quarterly performance of India Inc is failing to create any significant market trend. Investors are advised to ride the rally as long as it continues,” said Jimeet Modi, Founder & CEO Samco Group.

    Here are key factors that may drive the markets next week:

    US-China tensions at peak
    The US order to ban WeChat and TikTok last week stoked already simmering tensions with China. As expected by analysts, the Middle Kingdom has vowed to retaliate. Market participants will keep an eye on the next move from China. If it is something drastic, it will eventually hit global markets. “Global markets will definitely be impacted by the heightened US-China tensions and imminent Chinese reaction. Heightened Chinese aggression could have a negative impact on our markets in the near term. However, there could be a silver lining for Indian markets in the long term, with global investors hesitating to invest in Chinese companies. For lack of options, some of this money could find its way into Indian companies,” said Vinod Nair, Head of Research at Geojit Financial Services.

    US stimulus package
    The United States is likely to announce another round of stimulus next week. The package is being discussed between lawmakers. Meanwhile, Donald Trump used executive order to extend some of the already announced relief measures. “This move is expected to lift overall sentiment of the US market and in turn markets across the globe. Accordingly, domestic markets are likely to mimic on stimulus clues and sentiments are likely to be positive,” Modi said.

    Q1 earnings: Titan, Hero Moto
    We are entering the fag end of the June quarter earnings season, but still a number of large companies are yet to declare their numbers. Ipca Labs, Shree Cement, Titan and PowerDrid will release theirs on Monday, followed by Metropolis, Rites and Motherson Sumi on Tuesday; Aarti Industries, Aurobindo Pharma, Graphite India and Tata Power on Wednesday; 3M India, Eicher Motors, Hero Moto and Grasim Industries on Thursday and Glenmark Pharma, Hindalco and NTPC on Friday.

    Domestic macro data
    During the week, the government will release data on industrial production and manufacturing output for June on Tuesday. Retail inflation data for July will be out on Wednesday. The measure was just above 6 per cent, beyond the comfort level of RBI. Wholesale inflation data will be out on Friday.

    Covid-19 cases
    Fast rising Covid-19 cases are creating headwinds for an already fatigued market. India is now reporting the largest daily caseloads in the world and is fast approaching the patient count of Brazil, the second most affected country in the world. As of Sunday morning, India had over 21 lakh cases with nearly 43,000 deaths. The US, the country most affected by the virus, has surpassed 50 lakh cases while Brazil has recorded over a lakh deaths by now.

    Dollar movement and rupee impact
    The US dollar, which has weakened quite a bit in the past few months, can also have a bearing on various asset classes, including emerging market equities besides the domestic currency. The rupee shut shop on a flat note on Friday after trading in a narrow range. On a weekly basis, the domestic currency closed with a marginal loss of 0.17 percent. Expectations of dollar flows are guarding the downside for the rupee, while at the same time RBI is capping the upside by buying dollars to shore up its forex reserves, said analysts. “Going ahead, the local unit is likely to hover in a sticky range of 74.50-75.50, and it will be guided more by the movement in the Dollar Index, which is languishing at two-year lows, besides the pace at which RBI looks to accumulate its forex reserves,” said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking.

    Be cautious on gold
    Commodities have started attracting a lot of global attention as a lot of helicopter money is floating around the world. This superfluous liquidity is being channelled not only to precious metals like gold and silver, but in other metals and commodities too, say market watchers. “Given the swift one-way rally in gold, one should be cautious in the near-term but in the long term, prices are expected to inch upwards for the next few quarters. It is advised to allocate some portion of your portfolio to gold at least keeping the next 3-5 years in horizon,” said Jimeet Modi of Samco.


    Technical outlook
    Nifty50 continued to trade in the range of 10,950 to 11,300 for the third straight week and has now taken kind of a pause. The Bank Nifty index remained relatively weak while mid and smallcap indices outperformed. “As the rally in heavyweights has taken a pause amidst weakness in banking majors, a consolidation is possible before the next up leg. We maintain a cautiously bullish outlook for the near term unless Nifty breaks below 10850 Traders are advised to follow a buy on dips approach with 10850 as strict stop loss,” Modi said.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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