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IIP, Inflation data and rupee among key factors that will guide market this week

Wobbly rupee, rising global crude oil prices kept domestic stock market lacklustre last week.

Updated: Sep 09, 2018, 10.35 AM IST
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Wobbly rupee, rising global crude oil prices have kept domestic stock market lacklustre.
NEW DELHI: After six consecutive weeks of gains, Indian equity benchmarks Sensex and Nifty took a pause last week with Sensex slipping 0.66 per cent and Nifty falling 0.78 per cent.

But Friday's trade was the second consecutive session of gains on a daily basis, backed by a rally in auto, metal and technology stocks.

On Friday, the 30-share Sensex settled 147 points, or 0.38 per cent, higher at 38,389, while the Nifty50 closed the day 52 points, or 0.45 per cent, higher at 11,589.

Wobbly rupee, rising global crude oil prices and global cues amid worries of trade war remained the major factors that kept market lacklustre.

"The overall market sentiment for short term remains cautious due to ongoing international trade war, volatility in emerging market currencies and rising oil prices. However, we continue to maintain a positive outlook for long term and feel with elections around the corner and government focus on increasing farm incomes, cleaning up the NPA mess, promoting savings through various schemes such as Jan Dhan will be crucial and will help boost growth in the Indian economy," said Hemang Jani of Sharekhan by BNP Paribas.

The coming week is going to be a truncated one as the Indian equity market will remain shut on Thursday on account of Ganesh Chaturthi.

Below are the factors that may sway market during the next week:

Inflation numbers
India's consumer price index (CPI) based inflation data for the month of August will be out on Wednesday. The CPI or the retail inflation shows the changes in the prices of goods and services and it will be an important signal for the central bank to decide about hiking the repo rate in the monetary policy meet in October. The retail inflation eased to a nine-month low to 4.17 per cent in July from 4.92 per cent in June while food inflation more than halved to 1.37 per cent from 2.91 per cent. The inflation based on wholesale price index (WPI) for August will be released on Friday. Wholesale inflation eased to 5.09 per cent in July from 5.77 per cent in June.

Industrial production (IIP) data
The data of industrial production for the month of July will be released on Wednesday. Industrial production in the country expanded at a five-month high in June with all three major sectors —manufacturing, mining and electricity — contributing to the recovery. Growth, as measured by the Index of Industrial Production (IIP), stood at 7 per cent in June compared with 3.9 per cent in May.

Rupee's movement
Snapping its seven-session losing streak, the rupee on Friday closed higher by 26 paise at 71.73 against the US dollar after heavy intervention by the Reserve Bank of India. The Indian currency has witnessed a sustained fall and breached the 72 mark on Friday on rising crude prices and turmoil in emerging market currencies. How rupee behaves in the coming week, whether it finds its level or remains wobbly, will be crucial for market.

Trade war
The lingering trade dispute between the US and China is intensifying day by day. After the deadline for public comments on $200 billion China tariff expired on Friday, the US President Donald Trump said that his administration was ready to slap tariffs on almost all Chinese imports. As per Reuters, Trump warned on Friday he was ready to impose tariffs on almost all Chinese imports into the US, threatening duties on another $267 billion of goods on top of $200 billion in imports primed for levies in coming days. Stocks in the US fell after Trump's comment.

Global macros
China's consumer price inflation data for August will be released this Monday. Besides, country's industrial production data for August will be out on Friday. These key macroeconomic indicators of the world's second largest economy will influence the sentiment across markets.

The US core CPI data and retail sales data of August will be out on Thursday and Friday, respectively. For the month of July, the US core inflation print was 2.4 per cent. The upcoming data will be a hint for Fed's next policy guideline.

ECB and BoE
All eyes will be on the European Central Bank (ECB) meet coming Thursday to decide on key interest rates amid demands of ending its low interest rate policy. Trade worries, emerging market turmoil and uncertainties over Italian budget are the key factors ECB will consider before biting the bullet.

The Bank of England (BoE) too may maintain the status quo on Thursday. The BoE meanwhile has already indicated it could raise rates once a year following its 25 bps hike in August. So its views on Brexit talks and any comments from Governor Mark Carney on his tenure will be of more interest to gilt and sterling traders, Reuters reported.

Technical outlook
On Friday, the Nifty50 climbed for the second straight session and formed a ‘Hammer’ candle on the daily chart for the third consecutive day, suggesting the emergence of buying interest at intraday lows. Some analysts believe the index has not yet formed its short-term bottom and the ongoing momentum may not sustain for long.

"The Nifty on the weekly chart formed a bearish Belt Hold candle along with an Engulfing Bear pattern. This marks the end of the July-August rally from the short-term perspective. The recent structure shows that the Nifty is in a deep pullback mode after the first leg of the fall as it has reached near 61.8 per cent retracement of the recent fall. A sharp fall can be expected once the Nifty breaks the immediate support zone of 11,550-11,530. From the short-term perspective, 11,350-11,300 is the target area to watch out for," said Gaurav Ratnaparkhi, senior technical analyst at Sharekhan by BNP Paribas.

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