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Politics, Fed review & Brexit moves among 8 factors that will steer Dalal Street next week

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NEW DELHI: Cheer and positivity enveloped Dalal Street a week ahead of Holi, as strong buying kept the benchmark indices upbeat all through the week gone by.

The BSE Sensex jumped 1,353 points, or 3.7 per cent, for the week, while Nifty logged gains of 391 points or 3.6 per cent. Investors on BSE got richer by Rs 3.91 lakh crore in five sessions as total market capitalisation of BSE-listed firms shot up to Rs 1,48,58,003 crore from Rs 1,44,67,087 crore on March 8.

The market seems to be in a pre-election rally, which intensified on improved prospects of incumbent Prime Minister Narendra Modi returning to power. The rupee is at a seven-month high, FPIs have become bullish on Indian stocks and things are falling in place globally, with a disorderly Brexit ruled out.

Coming week is going to be a truncated one as equity, forex and commodity market will remain closed on Thursday for the festival of colours, Holi.

Having said that, here’s a lowdown on the factors that are likely to dominate the market all through the coming week:

Political pulse

Politics is always a major theme for the market. So when elections are going decide the course of politics, how can the market remain aloof of it? With the dates for the crucial vote set and the results due on May 23, politics will remain a key factor for the market. Investors will closely watch new political equations, vote projections and political soundbytes in the days ahead.

India’s current account data

India’s current account data, the difference between exports and imports, will be released on Tuesday. December quarter current account deficit (CAD) print is projected to ease from a five-year high. The country’s CAD widened to 2.9 per cent of the GDP in the second quarter compared with 1.1 per cent in the year-ago period, mainly due to a large trade deficit. On Friday, official data showed India’s trade deficit narrowed to a 17-month low of $9.6 billion in February.

US Fed interest rate decision

US Fed is meeting on March 19-20 to decide on interest rates. The market is broadly expecting the Fed to keep the rates unchanged amid conspicuous signals of a slowdown in the economy and inflation figures within target. A Reuters poll of economists showed the Fed will remain patient until the third quarter before raising rates once more, and then staying on the sidelines.

Fate of Brexit

While British Parliament has voted in the favour of extending the Brexit deadline of March 29, the road ahead for Prime Minister Theresa May looks bumpy. Next week, another round of voting will decide the fate of May’s revised EU divorce deal. If that fails, it will be important to see what the European Union decides at its March 21 summit. The EU may agree to an extension or press Britain for a delay of one year or more, a Reuters report suggested.

BoE rate decision

The Bank of England (BoE) will decide on interest rates on Thursday. The monetary policy committee of the British central bank is expected to keep the rates unchanged and hold any rate revision until beyond May 2020. Also, BoE has to wait and see how Brexit plays out before it makes any move. Still, the market will read the comments and try to get clues on the future course.

Other global macro triggers

Japan’s balance of trade data and February inflation data, UK’s January unemployment rate and February inflation prints and euro zone’s January trade balance data are among the important macroeconomic numbers markets will be watching through next week.

FPI flows to Indian stocks

Inflows from foreign portfolio investors (FPIs) in the January-March quarter are on course to hit the highest level in two years. Among the factors that have triggered this strong FPI flow are improved chances of NDA returning to power, a dovish US Fed stance and a steep drop in valuation of India stocks. Analysts say the positive FPI flow trend is likely to continue until after the elections, said Sameer Kalra, Founder, Target Investing.

Tech charts show bumps ahead

Nifty formed a candle pattern similar to a Shooting Star formation on the daily chart on Friday, suggesting resistance at higher levels. A long bullish candle on the weekly chart indicates that the index is prone to profit taking even though its near-term outlook remains positive. “With the market slipping into the overbought zone, it is advisable to book profit and see the next market move,” said Vaishali Parekh, senior technical analyst at Prabhudas Lilladher. Supports for the week are at 37,370/11,220, while resistance will be at 38,560/11,600, she said.

Source: Economic Times