NEW DELHI: The Reserve Bank of Indias hawkish stance, boiling crude prices and weakening rupee restricted strides of the bulls on Dalal Street, as the markets gains remained capped in the week gone by.
On a weekly basis, the 30-share Sensex gained 0.65 per cent, while the broader Nifty50 index added 0.79 per cent. The market logged fourth straight weekly gain.
In the week ahead, Q4 earnings and political developments will have a major say.
Teena Virmani, Vice President – Research at Kotak Securities, said: "Market will continue to focus on the upcoming election schedule coupled with earnings, yields movements and crude prices in the coming weeks."
Hardening of yields, both globally and back home, may have a negative impact on markets. Yields have moved up recently after RBI released the minutes of April monetary policy meeting stating upside risks to inflation which may come from MSP increases, crude price increase and resulting fiscal slippage.
Rising oil prices also pose a threat to the fiscal and current account deficit (CAD) estimates of the government. Oil price direction will also be determined by Opec output cuts and US decision on re-introduction of sanctions on Iran by May 12, Virmani added.
Let's have a look at the key events/developments that will steer market in the coming week –
Next batch of earnings: A host of big-ticket names are lined up to release their March quarter results in the coming week. Bharti Infratel, LIC Housing Finance and Reliance Infrastructure will declare their results on Monday, April 23 while telecom major Bharti Airtel, ICICI Pru Life and IDFC Bank are slated to release their numbers on Tuesday, April 24. Ultratech Cement and Wipro will announce theirs on Wednesday, April 25 whereas Axis Bank, Biocon and YES Bank will unveil their report cards on Thursday, April 26. Bandhan Bank, Maruti Suzuki and Reliance Industries are scheduled to announce their Q4 results on Friday, April 27.
Rupee bleeds profusely: The rupee on Friday sank 32 paise to hit a 13-month low of 66.12 against the US dollar, hit by rising crude prices and fiscal deficit worries. It was the lowest closing level of the domestic currency since March 10, 2017, when it had settled at 66.60 against the greenback. "Indian rupee fell for a fifth session as RBI minutes revealed that RBI's tone is more hawkish than what markets had previously gauged. FII selling and firm oil adds to pressure on rupee, while US dollar is also not expected to yield much ahead of May's FOMC meet," Anand James, Chief Market Strategist at Geojit Financial Services said.
Simmering crude prices: Last week, both the benchmarks, Brent and WTI (West Texas Intermediate) hit their highest levels since November 2014, at $74.75 and $69.56 per barrel respectively, buoyed by geopolitical risk and a tightening market. For the week, both benchmarks gained over 1 per cent. However, the prices took a slide when the US President Donald Trump took to Twitter to criticise rising oil prices. “Looks like OPEC is at it again,” he tweeted. "With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!"
Karnataka elections/Political developments: A host of political developments in the country will have a key role in influencing market direction in the coming week. In a major blow to the ruling BJP party, veteran member and one of Indias best known politicians, former finance and foreign minister Yashwant Sinha on Saturday quit the party saying country's democracy is in danger. This apart, opposition parties' move to impeach the Chief Justice of India Dipak Misra is likely to affect investor sentiments. Whether the CJI will be impeached or not is a thing to wait and watch but the move has surely shaken public faith on the Indian judiciary. In addition to these, investors will take clue from the upcoming state elections in Karnataka. Any change in political equations will affect market sentiments.
Tech charts suggest consolidation likely to continue: The Nifty50 index on Friday formed an indecisive 'Doji' candle on the daily charts. A Doji candle indicates that the decline is being bought into, as the Nifty50 got stuck in a range ahead of the expiry week. "The index appears to have formed an Inside Bar kind of formation in three sessions, as price action of last two sessions was confined to the range of bearish candle formed on Wednesday. Unless the Nifty50 emerges out of this 10,594 –10,509 range with a breakout on either side, trading shall remain listless," said Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory at Chartviewindia.in.
Milan Vaishnav, CMT, MSTA, says, "While Nifty is still facing resistance at the pattern resistance area on the daily charts, it remains overstretched and it would be no surprise if there are bouts of corrections at higher levels."
F&O expiry: Trading could be volatile next week as traders will roll over positions in the F&O segment from the near month April 2018 series to May 2018 series. The April 2018 F&O contracts will expire on Thursday, April 26. F&O stands for Futures and Options. Futures and Options represent derivatives of the stock market. These derivatives are the financial instruments deriving their values from underlying assets such as currency, gold, or the stocks of a company.
Kim shuns bomb, embraces peace and growth
In a welcome move, North Korea on Saturday announced it would immediately suspend nuclear and missile tests, scrap its nuclear test site and instead pursue economic growth and peace, ahead of planned summits with South Korea and the United States. North Korean leader Kim Jong Un is scheduled to hold talks with South Korean President Moon Jae-in next week and with US President Donald Trump in late May or early June, Reuters reported. The move, hailed by countries across the globe, is likely to boost investors when trading resumes on Monday.
ECB, BoJ policy meets: European Central Bank (ECB) is scheduled to announce its monetary policy on Thursday, April 26. Since the ECBs March meeting, economic data has disappointed, inflation estimates have been revised lower and a global trade spat may loom. Economists anticipate that ECB steps towards winding down QE will come only in June or later. But ECB chief Mario Draghi will be pressed on what he thinks about the economic wobbles, trade wars and the euro, said a Reuters report.
Bank of Japan will announce its policy stance on Friday. While no policy change is expected, the BOJs forecasts on inflation will be crucial.