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MARKET OUTLOOK FOR THE WEEK: 08-08-2016

MARKET OUTLOOK FOR THE WEEK: 08-08-2016
August 08
01:20 2016

Last week Rajya Sabha approved GST constitutional amendment bill, but market discounted the news. Wednesday and Thursday we saw profit booking and on Friday FII led buying kept the Nifty above the 8650 mark.  Going forward Nifty is likely to move up further towards 8720 and 8769. Even though the markets are likely to witness minor technical correction, it is prudent to buy options of Nifty rather than selling it, because of lower VIX.   Short covering can be expected if Nifty managed to close above 8700 next week.

Technically markets are likely to remain light especially on 14th August ahead of the Independence Day.  Fundamentally equity valuations are slightly over stretched, but implementation of GST in August is giving firm support to the market.  According to estimates, our economy can attain double digit growth very soon because of GST.

According to Moody’s the rating agency, the implementation of GST is a credit positive for Indian Sovereign and non financial corporate.  In their view, the auto sector is likely to be a major beneficiary of the GST regime as lower GST rate will be further keep the vehicle demand very strong.  Right now many of the front line auto stocks are trading their 52 week highs are ripe for a minor correction, price declines can be utilised to buy these stocks.

To support the domestic steel manufactures government extended minimum import price on steel for two months until October 4th.  Once the domestic demand picks up the government may roll back the MIP.

More than 500 mid-cap and small-cap companies are coming out with numbers next week the list includes the names like Bayer Corp, Britannia, Hero Motor, Idea, Max India, Polaris, Adani Port, Apollo Tyres, Century Tex, JK Tyre, Edelweiss, Geometric, Lupin, Manappuram, M&M, Motherson Sumi, Rajesh Exports, Suven, Thermax, Dhan Bank, GE Ship, IPCA Lab, MRF, WABAG, AIA Eng, FDC, Glenmark, Hindalco ,Jet Air, Shree Cement, Sun Pharma, UBL etc.

On August 9th, the RBI will meet on policy review and investors are not expecting any positive surprise as the inflation is at high.  But we can expect volatility in interest rate sensitive sectors including banking. Next week important macro data’s like Inflation and Balance of trade will come out.  Both these data’s can give sharp volatility to the market.

US continuing jobless claim, initial jobless claim are expected in the beginning of next week.  From EURO zone data’s like Balance of trade, inflation, industrial production and GDP growth rates are expected.

 One of the largest software companies in the world Cognizant’s full year revenue forecast is the lowest yet.  Discretionary spending in banking to be slower than earlier predicted is the key reason for the slower growth. Global macro- economic volatility, uncertainty of BREXIT and discretionary spending from their clients are the key concerns for the company.  Worldwide many software companies are going to hit by the same reasons.  May be we can expect earnings downgrades in this industry at least for some time. Global equity market participants were relentlessly supported our markets; they bought $4.8 billion worth shares as on August 2nd. If the global market sentiments are improving the same trend may continue for some more time.  Bank of England in a surprise move pared borrowing cost to a record low.  UK share hit one year high, after the rate cut.

 Last week Tata Motors came out with stellar performance, their Jaguar Land Rover sales has grown by around34% from the year ago month.  Similar trend was visible in Maruti also.  Auto ancillary stocks were in good demand because of higher sale of vehicles.

 

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ALEX MATHEWS

ALEX MATHEWS

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