India Markets Weekahead: Time to start buying again

March 13, 2016

A screen displaying  Finance Minister Arun Jaitley presenting the budget is seen on a facade of the Bombay Stock Exchange (BSE) building in Mumbai, India, February 29, 2016. REUTERS/Danish Siddiqui

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A volatile week saw the Nifty trading in a narrow 100-point range between 7,440 and 7,540 as the index consolidated to end at 7,510.20. Global stocks fell despite the ECB’s stimulus as chief Mario Draghi played down expectations of further rate cuts.

FII buying picked up to reach $554.8 million during the week, and the rupee continued to strengthen against the dollar, going past the 67 mark. Among sectoral gainers were autos, metals and the realty indexes. A bounce-back in global metal prices along with a hike in import duty on aluminum products led to a rally in commodity stocks.

Reforms took a front seat during the week with the passing of the Real Estate (Regulation and Development) Bill, the Aadhar Bill, amendments to the MMDR Act and a new oil and gas policy.

India’s new oil and gas exploration regime will allow a higher price for gas for new deep-water fields. Amendments to the MMDR Act, which involves transfer of mining lease for captive mines, will likely trigger M&A activities in the cement sector.

A real estate bill to protect home buyers was also passed in the Rajya Sabha. Whenever a sector gets regulated, there is an initial shake-out but in the long run, the sector becomes more transparent and this translates into growth. However, the real driver for real estate is the end-user demand, which is still elusive. The inventory pile-up is not going to clear anytime soon, thus exerting downward pressure on prices.

In macro data, IIP decelerated for the third straight month in January, hurt by a slowdown in the manufacturing sector.

PSU banks remained in the limelight after CRISIL downgraded eight of them due to deterioration in their asset quality, and revised the outlook of five of them to negative. Their fourth quarter numbers are going to be as bad as the previous one.

After Narayana Hrudayalaya, the next healthcare IPO hitting the street is HealthCare Global Enterprises (HCG), which will be in the price band of 205-218 rupees. HCG is a provider of specialty healthcare in the field of cancer and fertility. Given its focus, the company looks like a good long-term bet.

For the coming week, the SGX Nifty points towards a positive opening. Monday’s CPI and WPI inflation data will be keenly watched for cues on future rate cuts as they come ahead of the RBI’s monetary policy in April. The fourth and final advance tax collection data for corporates will be out during the week which will provide clues on India Inc’s Q4 earnings. Shares of PSU OMCs will be in focus as a periodic fuel price review is due.

On the global front, the U.S. Federal Reserve’s crucial two-day monetary policy meeting is scheduled on March 15 and 16. The Fed is on a path to raising rates, which differs from the ECB’s current moves. However, the Fed is likely to hold short-term interest rates steady this time amid uncertainties about markets and global growth.

Coming back to Indian markets, big triggers like monsoon forecast, corporate earnings and state elections are still one to three months away. For now, global cues and FII flows along with rupee movement are expected to dictate market trend.

If the Nifty continues to rise, it could breach the 7,700-7,800 levels. On the other hand, if we witness a fall, the index could languish at 7,000 points, but that probability seems very low. Overall, it seems the market will consolidate in the present range and corrections may be short-lived and bought into. Time to start buying again.

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