That sets up the market for an eventful week when the US Federal Reserve policy review is bound to keep equity investors worldwide on the tenterhooks, while weak macro data released this past week is likely to keep the bullish sentiment subdued.
If anything, the IPO mart will continue to celebrate early Diwali with SBI Life Insurance’s mega IPO scheduled to open on September 20.
Let’s have a look at the possible market triggers for the week that analysts are talking about:
US Federal Reserve’s policy review
US headline inflation print for August hit a seven-month high on rising petrol prices and housing costs and analysts wasted no time to predict quick action from the Fed. Remember, the US central bank has been wrestling with poor inflation numbers to judge the sustainability of the economy’s growth pulse. Recent data points show the US economy has returned to almost full employment and growth is back on track. And now August macro data looks too good for the Fed to ignore.
Thus far the market was pricing in a December Fed hike. So, if Janet Yellen decides to rush it through this time around, it would be a shock therapy for stock markets. The Fed meets through Tuesday and Wednesday, days when you should expect choppiness on Dalal Street.
Early Diwali in IPO mart
A small Rs 400 crore public issue of a little-known company, Capacit’e Infraprojects, drew record subscription of 187 times the issue size, reflecting investors’ exuberance in India’s primary market.
The issue immediately started showing about 60 per cent premium over the IPO price band of Rs 245-250 in grey market, which reflects the promise of mega listing gains.
Now that sets the stage for more euphoria around the IPOs of two frontline insurance companies that are on offer for subscription this coming week. The issue of private sector general insurer ICICI Lombard opened on Friday and more than a quarter of the issue size has already been subscribed to. Life insurer SBI Life’s will be India’s first billion-dollar IPO in seven years after public sector miner Coal India’s issue in 2010. The insurer is promoted by India’s largest lender SBI.
Plus, three issues sold successfully over the last fortnight — Dixon Technologies, Bharat Road Network and Matrimony.com — will be listed on the bourses this week. They could add vibrancy to the market
Market technical weak
Analysts say Nifty50 has been witnessing its slowest upward ascent since December 2016. There have seen failed breakouts and retracements. And many sectoral indices are hesitant to touch previous highs – signs that the market may be running out of steam.
Jimeet Modi of Samco Securities says the momentum oscillator indicates a marked weakness in the price ascent of the Nifty50. This shows that the market is still in a corrective mood.
The 10,130 and 10,150 levels may act as stiff resistance for the Nifty50 through the coming week. If it manages to cross these marks, Nifty50 may test new highs. Supports exist at 10,010 and 9,930 levels.
Domestic macro data can hurt
India’s current account deficit hit a four-year high of $14.3 billion in June quarter, rising from $3.4 billion in March quarter, data released by the Reserve Bank of India showed. That is roughly 2.4 per cent of the nation’s gross domestic product (GDP), and does not look too good. Economists blamed in on a rush to import gold ahead of the rollout of the goods and services tax (GST) from July 1.
Higher oil prices have also ballooned petroleum imports by around 14 per cent in August to $7.7 billion; data points that may hurt stock investor confidence.
The only solace is that the central bank’s forex reserve has just topped a record $400 billion for the first-time ever, and that should help keep things under control.
Spike in crude oil prices
The recent spike in crude oil prices has already caused a flutter in the domestic economy, forcing policy makers to debate if they should roll back fuel price decontrol and raising the inflation print alarmingly.
The spike in inflation has also stalled an expected interest rate cut by the central bank.
Globally, the spike in crude prices has been attributed to the two hurricanes that have damaged US oil refining infrastructure and also a disciplined output cut by the Opec.
Analysts say the near-term action in oil prices will depend on how prolonged will be the impact of Hurricane Harvey on US oil infrastructure. Should the spike in crude prices continue, stocks of some key sectors will come under pressure, pulling down the benchmark indices.
North Korea cauldron simmers
Over the past week, there were clear signs that financial markets were getting used to North Korea’s sabre-rattling. But as the UN tried to stifle the nation with further sanctions, the threats coming out of Pyongyang became more alarming. In its latest warming, the hermit state said it was ready to launch a devastating nuclear attack, which will see its enemies meet “miserable and final ruin”.
The geopolitical drama increasingly looks closer to further escalation and that would leave investors in the doldrums.