Booster package, trade war, RBI board meet among 8 key factors that may guide Dalal Street
Intensifying US-China trade war and no clear Federal Reserve rate cut path may cap upside.
- D-Street week ahead: Nifty bounce at this stage will at best be half-hearted
- The FM who gave India IBC & GST: Jaitley’s key milestones
- Steps for homebuyers next week: Nirmala Sitharaman
- Jalan Panel submits report, RBI board likely to vet it on Monday
- FPI surcharge rollback will apply to F&O trades as well
There is near consensus among analysts that the measures announced by the FM post market hours on Friday can lift domestic stock out of the rut and give Nifty at least a 2 per cent lift on Monday. But global developments have since turned adverse casting a pall of gloom over global markets and they are likely to have a bearing on Dalal Street as well.
US President Donald Trump’s fresh threat to China that sent Wall Street shares tumbling on Friday night, while markets were also unimpressed by US Fed Chair Jerome Powell’s comments in his Jackson Hole speech as he didn’t set a clear path for future rate hikes.
Add to that the looming expiry of August futures and options contracts and a grim GDP growth print expected for June quarter, and the coming week promises a roller-coaster ride.
Booster for FPIs, domestic investors: Perhaps the biggest booster for the market, and the much-awaited, the Finance Minister has withdrawn enhanced surcharge levied on long and short-term capital gains, arising from transfer of equity shares, units of equity oriented mutual funds and units of business trusts. Its favourable impact could be seen next week on foreign inflows, if global investors hold nerves over trade war concerns.
“With withdrawal of surcharge on key investor categories like FPIs, inflows into the market is expected to improve,” said Vijay Chandok, MD & CEO at ICICI Securities.
The finance minister has also promised a more comprehensive review of the recently imposed HNI surcharge on incomes in FY22. It may cheer market.
US-China trade war: Before the domestic market could enjoy the FM relief package, domestic investors may have to contend with Asian billboards that may be all in red on Monday, thanks to a 2 per cent plunge US stocks took on Friday following US Trump decision to retaliate against China's latest tariffs. Trump said the tariff on $250 billion of imports already in place will be raised to 30 per cent from 25 per cent on October 1. He said the remaining $300 billion worth of goods will attract 15 per cent tax (and not 10 per cent) from September 1. He also asked US companies to look for alternatives. Trump's decision was in retaliation to China's decision to impose additional tariffs on $75 billion worth of US goods.
Watch out: China industrial profit data for July on Tuesday.
Fed comments disappointing: Jerome Powell did say that Federal Reserve will act as appropriate, but also noted that it could not set all that right through monetary policy, if the trade war hit business investment and confidence and contributed to deteriorating global growth. Reuters reported that the overall tone of his statement may disappoint investors expecting the Fed to cut rates at its September meeting and possibly several more times this year.
RBI board meet: Bimal Jalan Panel has submitted its report on RBI’s surplus reserves and the board of the central bank will consider the same on Monday, ETNOW reported. The Jalan committee was constituted to suggest appropriate reserves that the central bank should maintain and dividends it should pay to the government. ETNOW reported that the panel has favoured transferring of RBI reserves, but in tranches. The report was submitted on Friday, it said.
F&O expiry, GDP data: Next week will set expiry of August series futures and options contracts on Thursday. Friday will see release of June quarter GDP numbers. Data on forex reserves, infrastructure output and bank loan growth will also be released on the same day.
PSU banks in focus: All eyes will be on PSU bank stocks after the FM announced upfront recapitalisation of Rs 70,000 crore for PSU banks, which is expected to induce additional lending and liquidity to the tune of Rs 5 lakh crore. “Quicker transmission of rate cuts, faster recapitalisation of banks and external benchmarking of rates are likely to aid credit off take,” said Garima Kapoor, Economist at Elara Capital.
Realty, housing stocks may cheer sops: Shares of real estate developers will hog limelight after the FM also promised to unveil some measures to address concerns of home buyers next week and another set of measures over the next few days. The FM said NHB will release Rs 20,000 crore additional liquidity to HFCs.
Auto stocks may hog limelight: Revision in one-time registration fees has been deferred till June 2020. It could have a significant impact on demand in the short term.
“The costs would have gone significantly up. It is positive for two-wheelers, three-wheelers and passenger vehicles. Higher depreciation for all vehicles – existing rate of 15 per cent raised by another 15 per cent, i.e. up to 30 per cent for vehicles purchased up to March 2020, will give a big boost mainly to the CV industry,” said Ashwin Patil, Senior Research Analyst at LKP Securities.