What are likely to be the major trading and investment cues for the week commencing from 13th of August?

The week starting 13th of August is likely to be a truncated with two trading holidays on 12th August and the 15th of August. There will only be 3 trading days during the week and that will keep traders wary of committing themselves to large positions in the market either way. The following are the major cues to watch out for.

· The highly anticipated FPI tax cut has not happened. The Sensex had bounced back by nearly 900 points on Thursday and Friday on hopes that the FM would offer some relief for the FPIs either in the form of a special exemption from higher taxes or by scrapping the LTCG tax. However, while the FM did speak about these issues including the cut in corporate tax rates, there has been no firm commitment from the government on these subjects. That should dampen the spirits of the market in the coming week.

· The IIP (index of industrial production) data that came out on last Friday saw the IIP fall sharply to just 2% with manufacturing falling to a low of 1.2%. However, there is hope that this situation would rectify once the impact of the 35 bps rate cut by the RBI starts getting factored into easier access to funding for corporates.

· Due to the shortened trading week, the markets may get some support from the short covering of positions. There were short positions built up post the budget and these may look to unwind ahead of a truncated week. Also, with the Kashmir situation volatile, traders may prefer to stay light ahead of the Independence Day celebrations.

· The auto sector has been demanding a cut in GST rates from 28% to 18% and easier funding flows from NBFCs. The government has promised to look into the concerns of the auto sector and some positive announcements are expected during the week. That could be positive for sentiments on auto stocks.

· Key earnings that are expected during the week include ONGC, Sun Pharma, Coal India and Bharat Forge. In fact over 2000 companies are expected to be announcing their results during the week and that is likely to impact large caps and mid caps.

· Keep an eye on the Chinese Yuan as it is likely to direct impact the Indian rupee. Last week, the Yuan dropped sharply beyond the 7/$ mark and if it moves towards the 7.1/$ mark then we could have the rupee getting closer to 71 mark. Currency could be the key factor to watch out for.

· Oil continues to be the big X factor during the week. Last week, Brent crude touched a low of $56.50/bbl before bouncing back on hopes that the OPEC may restrict oil supply further. However, signals on the trade war front have not been too positive and that is likely to depress oil prices.

· The CPI inflation data is expected on the 13th of August and it will be an important trigger for future rate cut expectations. The inflation is already closer to the 3.2% mark and if the inflation gets higher than the RBI may have second thoughts on further rate hikes. That is something to watch out for.

· The all important trade data for July will also be released on 14th August. Last month, the exports and imports had compressed by 9% and that is what the markets will be looking at more than the actual trade deficit numbers.

· FII action could also be important as FIIs have already sold $1.2 billion in August and nearly $4 billion since the Union Budget announcement. Despite strong domestic support, this remains the key data point for the markets.

There are also some global data flows like the US monthly inflation, jobless claims and Chinese vehicles data which will have a bearing on the markets during the week.