InvestorQ : What are the major trading cues for the week commencing on September 16 and how to structure trade?
Aashna Tripathi made post

What are the major trading cues for the week commencing on September 16 and how to structure trade?

Tisha Malhotra answered.
3 years ago

Over the weekend, the finance minister did make some significant announcements. That along with some key data flows will be important determinants of trade action during the week.

· There have been some positive announcements for the housing sector in the form of Rs.10,000 crore fund by the government to aid completion of semi-finished projects, in the middle class and low cost housing projects. This would be instrumental in reducing the long list of pending housing projects in India. This will only restricted to non-NPA and non-NCLT cases but will be positive for low cost housing players anyways.

· Nirmala Sitharaman also announced an Rs.50,000 crore export boosts to industry, especially in the case of traditional industries and this includes speedy processing of GST refunds for exporters. This is likely to be a positive cue for the export oriented sector in India.

· The markets are also likely to react positively to the inflation number at 3.21%, only marginally higher than July. This combined with tepid growth of just 4.2% on IIP will ensure that the RBI has a proper justification to cut rates when they meet again in October this year. The extent of rate cut is not too clear.

· The export incentives offered by the finance minister over the weekend needs to be looked at with reference to the trade data that was announced during the week. The month of August saw 6% fall in exports and 13% fall in imports, largely due to the ongoing trade war.

· The market sentiments are likely to be positive due to the favorable cues coming from the trade war front. The US has decided to put off imposition of tariffs on Chinese goods worth $250 billion in response to China keeping nearly 17 key items out of the tariff list. In addition, the US hints that they may ease sanctions on Iran also goes to signal global wars thawing to some extent. That should be positive.

· Even on the liquidity front, there are positive cues coming from Europe. The ECB has decided to restart its quantitative easing (QE) at the rate of €20 billion per month from November onwards. In addition, the rates have also been cut by ECB by 10 bps to (-0.50%). This is likely to impel the US Fed to also adopt a dovish stance and that would be positive for global market liquidity. Indian markets have typically benefited from easy liquidity conditions.

· One of the key features of the previous week was that the mid cap and small cap indices were also up by 2% and 3% respectively. If that is a sign of broadening of the rally, it is a good signal for retail investors.

· September 17 and 18 will also mark the US FOMC meeting where the next discussion on Fed rates will happen. In July, the Fed had cut rates by 25 bps for the first time in 10 years and the global markets are expecting the Fed to chip in with another 25 bps rate cut. This could add to the liquidity already infused by the ECB.

· An important even over the week will be the GST Council meet on Friday, although the markets may not get the time to react to the same. There are some important items being taken up for discussion in the meeting including the cut in GST on automobiles from 28% to 18% and further cut in GST on select FMCG items like biscuits.

· The rupee will also hold the key during the week. Since the first week of September, the INR has strengthened by 203 bps to 70.92/$ on the back of FPI flow expectations and bets on an end to the trade war. Rupee is expected to be supported by reforms.

· There has been a sharp fall in the volatility index (VIX) to a low of 13.21 and that could provide support to the market.

The reforms package announced over the weekend had led to short covering on Friday and is likely to determine the mood of the market in the first half of the week.