NEW DELHI: A fresh warning by rating agency S&P for what it called the ‘deeply troubled’ Indian economy, June PMI readings and auto sales numbers and updates on US-China trade tensions will likely set the direction of the stock market next week.
Tensions mounting on the India-China border and the last leg of March quarter earnings are some of the other cues investors would watch out keenly over the week ahead.
For the week gone by, the BSE Sensex gained 439 points, or 1.27 per cent, to 35,171, while Nifty rose 138 points, or 1.35 per cent, to 10,383.
Here’s what one should look forward to in the week ahead:
S&P warning on India economy
Domestic stocks may pay heed to S&P Global Rating’s warning suggesting that the domestic economy is in deep trouble. The rater anticipates India’s GDP growth to contract 5 per cent in FY21. S&P said difficulties in containing the virus, anemic policy response, and underlying vulnerabilities, especially across the financial sector, are leading it to expect the GDP contraction, before a likely rebound in 2021. The market, for now, is factoring in a speedy recovery for India.
US-China tensions, surging virus cases
US administration on Friday said it was restricting US visas for a number of Chinese officials for infringing on the autonomy of Hong Kong. A Reuters report suggested that Chinese officials have warned that ‘meddling’ in Hong Kong and Taiwan could lead Beijing to back away from its commitment to purchase US farm goods. This, along with reports of surging virus cases in the US, may dampen sentiment globally. US equity benchmark Dow Jones settled 2.84 per cent lower on Friday.
Auto sales, PMI readings for June
June auto sales data will be released from Wednesday onwards. A key demand indicator for the economy, auto sales were tepid in May after a washout April. Investors would also focus on monthly PMI readings. Markit India Manufacturing PMI is scheduled to be released on Wednesday while the Markit India Services PMI will be released on Friday. Any data on cement dispatches for the month will also be keenly tracked.
India-China trade, border tensions
With tensions on India-China border flaring, an Indian Express report suggested that the Federation of Indian Export Organisations (FIEO) has informed the government that Hong Kong and Chinese customs were holding back export consignments from India over the past few days. Similar reports have emerged about Chinese imports getting stuck at Indian ports and airports. The government, though, maintains that there are no formal instructions to customs to carry out such checks and they may be making them because of intelligence alerts, ET reported.
March quarter earnings
India will see the last leg of earnings next week. Many midcap and smallcap companies such as Central
Bank Of India, CESC, Jammu & Kashmir Bank, Minda Corporation, MRF, NOCIL, Parag Milk Foods, PC Jeweller, Reliance Communications, Religare Enterprises, Subros, Welspun India, Cera Sanitaryware, Deepak Fertilisers, Dish TV India, ONGC, Sadbhav Engineering, SAIL, Khaitan (India), SML Isuzu, Uflex will report their quarterly earnings in the coming week.
FOMC minutes, FPI trend
The US Federal Open Market Committee Meeting (FOMC) minutes for the June 9-10 meeting will be released on Wednesday night (IST). The central bank at its June 10 policy meeting pledged to keep monetary policy loose for years to help an economy that had buckled under the shutdowns, restrictions and other measures to battle the coronavirus pandemic. The minutes will be important as they could influence FPI inflows that stood at Rs 2,366.56 crore this past week.