Foreign fund movement to steer the equity markets (Market Outlook)

Mumbai, Nov 20 (IANS) Foreign fund movements, along with the last of quarterly earning results and the government’s efforts to infuse cash liquidity, are expected to set the tone for the Indian equity markets in the coming week.

Besides, developments surrounding a possible US rate hike and a probable monetary policy easing by the Reserve Bank of India (RBI) will be other major themes for the week starting from November 21.

“Investors will closely follow the trend in FII (foreign institutional investors) fund movement in the Indian equity markets and ability of the key indices to recover from the current low levels,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.

Last Thursday, the US Federal Reserve’s Chairman Janet Yellen signalled a possible US rate hike in December.

A hike can potentially lead foreign portfolio investors (FPI) away from emerging markets such as India, and dent the business margins of corporate sector, as access to capital from the US will become more expensive.

The prospects of a US rate hike also depressed the Indian stock markets during the week ended on Friday, as it triggered a massive outflow of foreign funds.

The provisional data with stock exchanges for Friday showed that the FIIs sold stocks worth Rs 988.93 crore, whereas for the entire week ended November 18, foreign investors sold Rs 6,221.11 crore.

Figures from the National Securities Depository (NSDL) disclosed that FPIs were net sellers of equities worth Rs 6,666.11 crore, or $985.91 million from November 15-18.

Apart from the equities markets, the Indian rupee is also expected to come under pressure from global cues in the coming week.

As per currency market observers, the Indian rupee can further depreciate from its current levels of 68.14 against a US dollar to 68.60 in the coming week.

“Over the next week, we can see the Indian rupee weaken towards 68:60-80 levels on spot, on the back of rising US bond yields and the US dollar,” Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, told IANS.

On Friday, the Indian rupee weakened to its lowest level in the last nine months. It receded by 32 paise to 68.14 against a US dollar from its previous close of 67.82 to a greenback.

“Volatility is expected to flare-up at the Indian equity markets due to short covering and value buying at lower levels from traders in coming sessions,” Desai pointed out.

“Stock specific price movement can be seen in Indian equity markets next week.”

Even the remain quarterly earning results are also set to influence investors’ sentiments. They will be watched for sector specific developments.

Major firms like Larsen and Toubro (L&T) and Bata India, SpiceJet and Oil India are expected to come out with their Q2 results during the upcoming week.

“On the earning front, it was expected that earnings will rebound in the second half of this year, but now there are concerns that the pace of the rebound could slow down due to demonetisation of currency,” D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, told IANS.

“The India’s growth story remains strong and it is expected that India would continue to attract inflows due to attractive valuations.”

Aggarwal added:”Investors with long-term horizon should use every dip to get into quality stocks. Nifty is expected to move in range between 8,000-8,300 levels in the coming days.”

For the week ended November 18, massive outflow of foreign funds, along with rupee depreciation and political bickering over the government’s recent demonetisation move, had plunged the key Indian equity markets.

In addition, heightened chances of a US rate hike, coupled with dour investor sentiments over the recent victory of Donald Trump in the US Presidential Elections dented investors sentiments.

On a weekly basis, the barometer 30-scrip sensitive index (Sensex) of the BSE had receded by 668.58 points or 2.49 per cent at 26,150.24 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) had edged lower by 222.2 points or 2.68 per cent to 8,074.10 points.

(Rohit Vaid can be contacted at rohit.v@ians.in)

–IANS

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