RBI rate review, Q3 earnings among 6 factors steering D-Street in the week ahead
Nishant Kumar: ETmarket: February 03, 2019
NEW DELHI: Booster dose from the Interim Budget and Fed policy helped Mr Market settle in the positive territory last week even as third quarter earnings and the expiry of January F&O series kept stocks volatile.
While Budget moves that are likely to boost consumption were seen as major positives for the market, investors also breathed easy as the fiscal deficit numbers projected in the Budget looked manageable. The US Fed also assuaged concerns of further tightening this year.
Third quarter earning numbers were mixed and the US-China trade talks did not conclude with any significant outcome, yet the market managed to log some gains for the week.
RBI money policy review
The monetary policy committee of the Reserve Bank of India (RBI) will announce its rate policy on February 7, Thursday. Analysts are expecting a softer stance from the central bank in the wake of easing inflation. As per global financial firm Goldman Sachs, RBI may cut interest rates by a quarter percentage point this time around. Economists in a Reuters poll said RBI will change its stance to 'neutral' in February and cut interest rates in June at the latest. In its last meet, the central bank had maintained status quo by keeping the repo rate unchanged at 6.50 per cent and retaining its ‘calibrated tightening’ stance.
Q3 earnings
A majority of Nifty companies have disclosed December quarter numbers, but some sectoral heavyweights are yet to show how they fared during the three-month period. Among the key earnings that will draw market's attention this week are of Tata Motors, Tata Steel, Tech Mahindra, Lupin, Punjab National Bank, HPCL, BPCL, ACC and Apollo Tyres.
The macro front
India's Nikkei Services Purchasing Managers Index (PMI) for January will be released on Tuesday. The December Services PMI print for services sector dipped to 53.2 in December from 53.7 in November. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 53.9 in January, indicating a stronger improvement in the health of the goods producing sector. An index over 50 shows expansion and below 50 indicates contraction.
From the global front, market will observe China's Caixin Services PMI (January), US ISM Non-Manufacturing PMI data (January) and US Balance of Trade data (November).
Bank of England rate review
The Bank of England (BoE) will decide interest rates on Thursday in which it is expected to consider the Brexit aftermath and concerns of slowdown in global economy before treading the path of rate hikes. Market is expecting BoE to hold the bank rate at 0.75 per cent. As per Reuters, Governor Mark Carney and his fellow interest rate-setters are expected to keep borrowing costs on hold at 0.75 per cent, with Britain at risk of leaving the European Union just 50 days later without a transition deal in place to ease the shock.
Global sentiment
The Chinese market will be shut for a week for the Spring Festival and the focus will be broadly on the US market, which will react to earnings numbers and macroeconomic triggers. One major concern for the global financial markets this week could be liquidity cruch as China market will remain closed and because of the 35-day government shutdown that ended just a week ago in the US.
Technical outlook
Despite the conspicuous positivity, technical indicatros show the domestic market is slightly indecisive as of now. Charts showed the Nifty index has formed a bullish candle on the weekly scale with long lower shadow. This pattern is signalling volatile movement ahead in the market, said Nagaraj Shetti of HDFC Securities. The 10,985-90 range may prove to be a strong resistance for Nifty in the coming days. On the flip side, the 10,820 level may offer some support, experts said. Mazhar Mohammad of Chartviewindia.in said unless Nifty clears its critical resistance at 10,987 in next one or two sessions, there will be a higher probability of the index slipping towards the 10,600 mark.
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