InvestorQ : What are the key trading cues for the coming week that I need to keep an eye on in the stock markets?
Priyanka Jain made post

What are the key trading cues for the coming week that I need to keep an eye on in the stock markets?

Neha Samdani answered.
3 years ago

The previous week the inflation and IIP data was announced. While inflation was higher than anticipated, the IIP also showed good traction across mining, manufacturing and electricity production. Also, the trade deficit at $15.36 billion was wider than expected. For the coming week, some of the key trading cues could be as under.

· After the trade data announced last week for the month of May 2019, the current account balance will be announced for the fiscal year ended March 2019. The current deficit for the year ended March 2018 had come in at a multi-year high of -2.3%. The current account deficit for March 2019 is expected to be closer to 2.7% and any number above that could be a negative for the rupee and for external ratings of India. The data will be announced on Monday evening and will be closely watched.

· One of the key data points will be the US Fed meet on June 18thand 19th . While Fed has indicated that they would keep rates steady, the markets are expecting that with falling growth and rising deficits, the US Fed could go in for a 25 bps rate cut. In fact, the CME FEDWATCH tool is already assigning a probability of 33% to a rate cut on 19th June. A rate cut will be the much needed boost for all emerging markets including the Indian markets.

· Crude oil could be another important cue. The oil prices in the Brent market took support at around the $60/bbl mark during the week but were really struggling to bounce back. While the Iran sanctions and the troubles in the Middle East are pushing prices higher, there is pressure on oil prices at higher levels due to higher supply from the US and the risk of a slowdown in the global economy. Anything above $70 could be a risk for Indian markets.

· Pre budget discussions have already begun between the finance minister and the key stakeholders. The stock markets will be looking at key cues like the guidance on fiscal deficit, bank recapitalization, NBFC rescue package etc. The spectrum fund raising of $84 billion will be a boost to revenues but it is not clear whether there will be appetite with telecom companies already reeling under losses.

· The GST Council will be meeting on June 20thand one of the major announcements would be on the e-invoicing cut-off. But markets will be looking for something more in the form of exemptions for small businesses, uniform rates, reduction in the number of slabs etc. A progressive guidance on the GST road ahead will be viewed positively by the markets.

· The minutes of the Monetary Policy Committee (MPC) will be announced on 20th June. The policy was announced on 06th June wherein the RBI had cut rates by 25 basis points. However, markets will be more interested in finding out if the accommodative policy will leave more room for cuts in the future or not. The language of the discussion between the 6 members will be made public in the minutes and that will be a more comprehensive disclosure than the policy statement.

· Finally, there are two market factors to look at. Firstly, there is huge accumulation in 12,000 call options on the Nifty. Unless this concentration shifts upwards, the level is likely to be a psychological barrier for the Nifty. Secondly, the VIX will be a good indicator of the risks in the market. VIX fell below the 14 mark last week. As long it sustains around this level, the downside risks to the market may be limited.

Of course, apart from all these factors, also keep an eye on how the stressed cases like Jet Airways, Dewan Housing, IL&FS and Essel Group pan out in the coming week. They could hold the key to short term movements in the market during the week.