Progress of monsoon, inflation prints, IIP among 7 factors that will steer market next week
India's retail and wholesale inflation data will be released on Wednesday and Friday, respectively.
Weak global sentiments and subdued macroeconomic indicators have added to the bearish mood. The US threats to impose tariffs on more trading partners; a slippage in India's GDP growth to 5.8 per cent in January-March period, its slowest pace in 17 quarters, dented investor sentiment.
Even though equity benchmarks Sensex and Nifty ended Friday’s session in the green, both suffered losses on a weekly basis, breaking the winning streak of three consecutive weeks.
Going into a new week, global cues, flow of foreign funds and movement of crude oil prices will have their sway on the market. Investors will be watching the inflation print due earlier in the week.
Let's take a look at the factors that will impact the market in the week ahead:
Progress of monsoon
Delayed by a week, annual monsoon officially arrived on the coast of Kerala on Saturday. The seasonal wind, which delivers about 70-75 per cent of the country’s rainfall, has a larger impact on the Indian economy, as almost half of India's farmland depends on it for irrigation. The rainfall is expected to be average as projected by the India Meteorological Department (IMD). In the days to come, the progress of monsoon will remain a key monitorable for the market.
India's retail and wholesale inflation prints for May will be released on Wednesday and Friday, respectively. RBI, in its last monetary policy meet, raised retail inflation forecast marginally to 3-3.1 per cent for the first half and 3.4-3.7 per cent for the second half of this financial year. If the coming inflation data conforms to RBI's estimates, hope of yet another rate cut will be bolstered.
IIP data for April
India's industrial production data for April will be released on Wednesday. The country's industrial output declined by 0.1 per cent in March, hitting a 21-month low, due to a contraction in manufacturing, capital goods and consumer durables. Manufacturing, which constitutes 77.63 per cent of the Index of Industrial Production (IIP), shrank 0.4 per cent in the month. The market will take a close look at this significant indicator of the country's economic health.
Trade war and indicators of a global economic slowdown are fanning worries of an approaching recession. As per Reuters, US job growth slowed sharply in May and wages rose less than expected, raising fears that a loss of momentum in economic activity could be spreading to the labour market, which could put pressure on the Federal Reserve to cut interest rates this year. Markets across the globe will closely observe Japan's first quarter GDP numbers and inflation prints of China and the US in the coming week. Besides, China's trade balance data for May and the US retail sales data will tell more about the direction of the world economy.
Flow of foreign money
June so far has seen the continuation of bullish stance of foreign portfolio investors (FPIs) on the Indian market. As per available data with NSDL, FPIs have pumped in Rs 7,095 crore into Indian debt and equity markets in June so far. However last Friday, when the market ended marginally higher, FPIs took out Rs 478.84 crore, NSE data showed. The flow of foreign funds will remain an important trigger for the market in the coming week.
Direction of crude oil & rupee
Trade war jitters and signs of weakness in the global economy have dragged oil prices down as the market fears a drastic fall in demand of the commodity. As per Reuters, with pricing sliding suddenly to five-month lows, analysts have been left wondering if demand for the black gold is weaker than earlier thought. Such heavy selling is pretty rare, particularly outside recessions. Falling crude augurs well for the Indian economy, easing pressure from its fiscal books and pushing the currency higher.
Tech indicators show market indecisive
Nifty50 on Friday formed an indecisive Doji candle on the daily chart. On the weekly scale, the index formed a bearish Dark Cloud Cover. Since this pattern formation took place on the weekly time scale, any corrective action could be significant, said Arun Kumar, Market Strategist, Reliance Securities. However, analysts say consolidation, if any, will be healthy and should be used as an opportunity to buy on dips. "We believe index would undergo healthy consolidation in the broad range of 11,600–12,000 and form a higher base for the next leg of the up move. Price structure in the Nifty remains firmly positive and we do not foresee the index breaching the exit poll session low of 11,591. Any dips should be used as a buying opportunity for the up move towards 12,000," said Dharmesh Shah, Head – Technical, ICICI direct.