Sunday, May 22, 2016

Top five factors to watch out for on Dalal Street this week

NEW DELHI: It looks like the domestic equity market is going through a phase of consolidation as it has been moving in a narrow range, which is unlikely to get broken anytime soon.

The Nifty50 closed 0.8 per cent lower while S&P BSE Sensex ended 0.7 per cent down for the week ended May 20.

The weakness is likely to continue for some more time as long as Nifty50 trades below the 7,900 level. Strength in the dollar is troubling market experts because that has led to weakness in metals and commodity-centric stocks.

ETMarkets.com collated a list of top five events which investors should watch out for in the coming week:

May F&O expiry: The market is expected to remain volatile ahead of the May F&O expiry due on May 26, Thursday. The expiry could well happen around the 7,800 level, experts sa id.

"If the index manages to hold below the 7,800 level, then earlier Put writers of strike prices 7,800 and 7,700 may force unwinding of positions and fresh Call writing may even add positions at strike price 7,800," Chandan Taparia, Derivatives Analyst - Equity Research, Anand Rathi Financial Services told ETMarkets.com.

Quarterly Results -- L&T, SBI in focus: Next week holds importance as some of the very big names of India Inc are scheduled to report their earnings[2] for the quarter ended March 31. Data compiled by ETMarkets.com showed over 800 BSE-listed companies are set to disclose their quarterly earnings which include names like SBI, Larsen & Toubro, BHEL, Tata Steel[3] , Bajaj[4] Auto[5], GAIL, HPCL, India Cements, IOC, BPCL, Oil India, Tata Power[6] , Central Bank, Cipla and Dish TV .

Technicals -- Watch 50 EMA: The Nifty50 broke below its key support areas on Friday, which signifies that the market is losing momentum and there is further downside ahead over the next few sessions. The 50-EMA displaced immense strength in pushing the Markets[7] higher at least on t hree occasions in the three months including May.

Technical gurus are of the view that 50-EMA will be an acid test for the market. If the index slips below 7,727 convincingly there is a higher possibility of a further decline in the next few sessions, if not we could well see a bounce back in this week.

Monsoon commentary: The progress of monsoon will keep the market on the edge as IMD department has already indicated that it will get delayed by a week. Southwest monsoon which hit the Andaman and Nicobar Islands two days before its normal date last week, is likely to weaken because of a cyclone in the Bay of Bengal. It will result in a delay of its onset in Kerala.

"The monsoon would be very important for markets. How it advances across the country and how the spatial distribution of rains is can really be a 'make or break' factor for the Indian economy[8] and stock market," said Pankaj Sharma, Head of Equities, Equirus Securities.

FII outflow/forex reserves: forex[9] reserves data and flows from foreign institutional investors will be an important factor which can dictate the trend for markets. Foreign institutional investors (FIIs) pulled out over Rs 4,000 crore from Indian equity markets in the previous week.

On Monday, markets will react to forex reserves data which dipped marginally by $980 million to touch $361 billion for the week ended May 13, said the Reserve Bank of India[10] (RBI) in its weekly statistical report.

A shrinking forex reserve would mean that the central bank is losing ammunition to defend the rupee in the wake of rising dollar. The appreciating value of the us dollar has caused the RBI to sell its dollar reserves in order to check the slide of the Indian currency which is now hovering at 67.45/USD.

"The market will keep a watch on Foreign Reserve and bank loan growth data will be release in next week. Expected Foreign Reserves are expected to come around $363.4 billion," said Rohit Gadia, Founder & CEO, CapitalVia Global Research.

"If Foreign Reserves are greater than that we can expect it to affect Nifty positively but in case it isn't, we can expect a further bearish movement," he said.

[1]

References

  1. ^ market (economictimes.indiatimes.com)
  2. ^ earnings (economictimes.indiatimes.com)
  3. ^ Tata Steel (economictimes.indiatimes.com)
  4. ^ Bajaj (www.zigwheels.com)
  5. ^ Auto (economictimes.indiatimes.com)
  6. ^ Tata Power (economictimes.indiatimes.com)
  7. ^ Markets (economictimes.indiatimes.com)
  8. ^ economy (economictimes.indiatimes.com)
  9. ^ forex (economictimes.indiatimes.com)
  10. ^ Reserve Bank of India (economictimes.indiatimes.com)

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