Top 5 factors that are likely to chart market direction this coming week

0
61

NEW DELHI: The Reserve Bank of India (RBI) surprise pause on policy rate, uncertainty over the outcome of UP election and Trumponomics at work were some of the major factors that kept market participants on the edge through the week ended February 10.

The Nifty50 ended the week on a flat-to-positive note, but below the crucial resistance level of 8,800. It closed 0.6 per cent higher at 8,793 while the S&P BSE Sensex rose 0.3 per cent to 28,334 in the same period.

In the absence of any major trigger, the next week looks unexciting and will be guided largely by global cues. Hence, chances of consolidation cannot be ruled out. This opens room for some stock-specific action.

The index consolidated between 8,840 on the higher side, which is an 88.6 retracement of the rise from 6,823 to 9,119, while on the downside, the index got support at 8,720 level.

“I think the market might move sideways now. From the Nifty50 perspective, we have seen a good rally and most of the things that could have acted as hindrances have been discounted,” Rahul Shah, Motilal Oswal Financial ServicesBSE 1.19 %, said in an interview with ET Now.

“The market will again come back to witness stock-specific or sector-specific action. Housing finance companies, OMCs as well as private sector banks will remain in focus,” he said.

Going by the buzz on Dalal Street, here is a list of five factors that could chart market direction during the week:

UP election crucial for market: The first phase of Assembly election in Uttar Pradesh (UP), which began on Saturday, will keep market participants on the edge. UP has a big say in Indian politics and for the BJP, there is a lot at stake, say experts.

Out of the 690 legislative assembly seats at stake in five states – Uttar Pradesh (UP), Goa, Manipur, Uttarakhand, and Punjab – UP alone has 403 assembly seats, which is about 60 per cent of the total. The results will be declared on March 11.

“The results will be seen as an indication of trends for the 2019 general election and, hence, the market as well as foreign investors are likely to cheer up a favourable outcome for the BJP,” said Vijay Singhania, Founder-Director, Trade Smart Online.

“A BJP win in UP will have a positive impact on the stock market, as the state will give the ruling government more strength in the Rajya Sabha to pursue more pro-economy steps,” he said.

Monthly inflation data: The government will announce monthly inflation data based on consumer price index (CPI) for January after market hours on Monday and wholesale price index (WPI) for January on Tuesday.

The general CPI inflation dipped to a 25-month low of 3.41 per cent in December, compared with 3.63 per cent in November. The wholesale price index (WPI)-based inflation rose to 3.4 per cent in December from 3.2 per cent in November.

“The interesting thing about RBI’s ‘neutral’ stance is that it can move either way. Inflation targeting continues to remain the centre of the plate for RBI,” Shanti Ekambaram, President Consumer Banking, Kotak Mahindra BankBSE 1.03 %, said in an interview with ET Now.

“Although there is a certain objective in a trajectory that they have highlighted, they want to make sure that they get to that trajectory of 4 per cent with plus or minus 2 per cent,” he said.

Next batch of quarterly results: More than 300 companies are expected to announce their earnings in the coming week. “The focus will continue to be on management commentary for guidance and outlook for the way forward,” Singhania said.

Coal IndiaBSE 0.79 % and Idea will report their earnings on Saturday. Companies that investors can track during the week include CrisilBSE 0.20 %, Mahanagar Gas, Reliance CommunicationsBSE -2.26 % (RCom), Sun PharmaBSE -0.25 %, Tata Motors, REC, SpiceJetBSE -0.23 % and VoltasBSE 0.76 %, among others.

Global factors: Among key global cues, China’s consumer price index (CPI) data for January will be out on Monday and US core consumer price index (CPI) data for January will be released on Wednesday. US crude oil inventories data will be announced on Wednesday.

Technical factors: The domestic market saw a range-bound week as the bulls, as well as the bears, tried to show their dominance. The index has been struggling to stay above its crucial resistance level of 8,800, but the bulls are not letting it go that easy because every correction towards 8,700 was bought into.

“On the weekly chart, we can see a formation of ‘Dragonfly Doji’ pattern, which is not a major reversal sign but indicates an uncertainty or pause in the current trend,” Sameet Chavan, Technical Analyst at Angel Broking, told ETMarkets.com.

“The pattern needs a confirmation and in this case, a sustainable move below 8,715 would activate the pattern, which may eventually lead to extended profit booking towards 8,650-8,610 levels,” he said.

He said the undertone remains strongly bullish and expects the index to move towards an all-time high level soon.