InvestorQ : What are the key triggers for the coming week for the stock market trading?
Angel dcosta made post

What are the key triggers for the coming week for the stock market trading?

Anamika Sodhani answered.
2 years ago

The coming week is likely to be marked by the post credit policy reactions and the pre budget expectations. There are also some critical data flows expected during the week apart from the global macros which will continue to have an impact on Indian markets. Here are some of the key triggers.

· DHFL will be closely watched as that was the company that created the system risk worries in the previous week after it defaulted on payment on interest to the tune of Rs.960 crore last week. The markets will be keen to see progress on their asset sales as well as how they will meet the liquidity gap of Rs.4000 crore in payments in the month of July 2019.

· Progress of the monsoons will be the key factor. The Monsoons did hit Kerala coast on the 07th of June but that was nearly 10 days later than normal. Delayed monsoons have an impact on the sowing season and that eventually impacts the total food grain output. The progress of the Monsoon towards the key cropping areas will be watched.

· Markets will also be keenly watching if banks follow the RBI cue and cut rates. Since Jan 2014, the RBI has cut rates by a net amount of 2.25% but the transmission is not even 70 bps. If the rate transmission does not catch up this time around, the RBI may be reluctant to further cut rates in the subsequent policies.

· The budget expectations will start playing out now with just about 3 weeks to go for the actual budget presentation. Nirmala Sitharaman has already affirmed that the budget will be focused on unleashing the animal spirits of capitalism. The hopes will be of a series of announcements to push up growth including tax cuts, public spending, higher investments etc.

·The IIP data for April will be announced on June 12th and it will be a key data input for the forthcoming Union Budget and for the next monetary policy. The IIP growth for March had been negative at (-0.1%) and the market would be keen to ensure that this trend is arrested.

· Apart from the IIP data, the CPI inflation (retail inflation) will also be announced by the MOSPI on June 12th
. The rate of inflation will be important since the rate had gone up marginally to 2.92% last month. A higher rate of inflation will work against the RBI plans to cut rates further and the markets would prefer inflation staying subdued around these levels only.

· The Commerce Ministry will announce the Current Account Deficit (CAD) numbers for the fourth quarter on 13th June. The markets will be keen to ensure that the CAD does not really go sharply above the 2% mark as it would negatively impact the value of the rupee and the external sovereign ratings for Indian paper.

· Brent Crude will continue to be an important input. The markets had some relief after the recent fears of a trade war led to the Brent Crude prices falling from $75/bbl to $60/bbl. The week closed at $63.29/bbl and Indian markets will prefer a situation where the crude prices stay around that level. It imposes less pressure on the trade deficit and also on the external rupee value.

· One cannot really miss out on the trajectory of the trade war. The trade war has taken a harder form in the previous week with the US threatening to impose punitive tariffs on $300 billion of Chinese imports. The World Bank and the IMF have already guided a 70 bps fall in growth rate and that is not great news. Any worsening of the trade war will be key inputs for the markets.

· The NBFC crisis (even outside of DHFL) needs to be watched as that remains the biggest systemic risk for the markets at this point of time. The way this contagion spreads to banks and to mutual funds will remain a key factor in determining the direction of the markets.

· Keep an eye on the VIX of the market. In the two weeks following the election outcome, the VIX has fallen from a high of 29 to more manageable levels of 14.5. That is the median rate at which VIX has stayed. For the markets to see buying interest at higher levels, the VIX remaining around current levels will be the key.

Buying action from foreign portfolio investors (FPIs) will have a bearing on the stocks markets in the short to medium term. FPIs have hardly infused Rs.520 crore in June as against nearly Rs.69,000 crore infused into the equity markets since February. Robust FPI flows have the capacity to keep the rupee and the indices buoyant.