Key macro-economic data to guide the equity markets

Key macro-economic data, along with the next batch of quarterly results and trends in global markets, are expected to guide the Indian equity indices during the upcoming week.

Further, cues on future direction of key lending rates in India and the US will have a major bearing on investors' sentiments.

"Next week should greet the markets with a slew of economic data, including PMI (purchasing managers index), eight core activity, fiscal deficit and GDP (gross domestic product)," Anand James, chief market strategist at Geojit BNP Paribas Financial Services, told IANS.

According to D.K. Aggarwal, chairman and managing director, SMC Investments and Advisors, equity markets are likely to take cues from domestic news and investments by foreign as well as domestic investors.

"It is expected that market will continue to see northward movement from here," Aggarwal said.

Besides, investors are expected to closely track the next batch of fourth quarter (Q4) results.

Entities like Tata Motors, Mahindra and Mahindra (M&M), Blue Star, SAIL, Bhushan Steel, Bajaj Electrical and Sun Pharmaceuticals are expected to announce their Q4 results in the coming week.

"Going forward, investors will closely track the next batch of Q4 results of India Inc, along with the movement of the rupee against the dollar and crude oil prices," said Vaibhav Agarwal, vice president and research head at Angel Broking.

On the global front, investors will look towards any cues on a possible June rate hike in the US. The US Federal Open Market Committee's (FOMC) meet scheduled for June 14-15 will decide whether or not to increase the key lending rates.

A hike in the US interest rates is expected to lead away Foreign Portfolio Investors (FPIs) from emerging markets such as India.

"Going forward, there are increasingly signs emerging that there would be a rate hike by US Fed in the next round. This would be a very important factor for inflows from foreign investors," elaborated Pankaj Sharma, head of equities for Equirus Securities.

In addition, investors will focus on the upcoming decision by the MSCI (Morgan Stanley Capital International) on whether or not to include five percent of China's A-share listed companies in the MSCI Emerging Markets index.

Furthermore, other global factors like proposal by China's Securities Regulatory Commission to open the country's commodities futures markets to overseas and financial investors is expected to impact international markets.

However, market observers did not rule out a minor correction in the coming week, after the domestic markets made healthy gains during May 23-27.

The key indices were catapulted to their highest weekly close in the last three months on the back of positive global cues, fresh influx of foreign funds and healthy fourth quarter results.

The benchmark indices also touched their new six-month intra-day highs during the week ended May 27.

Consequently, the wider 51-scrip Nifty of the National Stock Exchange (NSE) rose by 406.95 points or 5.25 percent to 8,156.65 points.

Similarly, the barometer 30-scrip sensitive index (Sensex) of the BSE surged by a massive 1,351.7 points or 5.34 percent to 26,653.60 points.

"Nifty index had witnessed best weekly close in three months as bulls led the charge in the last three trading sessions," said Nitasha Shankar, senior vice president for research with YES Securities.

"However, following this sharp rise indices have reached overbought zone telling that a minor consolidation cannot be ruled out in the coming week."

Moreover, Shankar predicted that broader markets are expected to outperform the headline indices in the coming week.

"Coming week can see outperformance in the mid-cap and small-cap space while benchmark indices consolidate," Shankar added.

The broad-based markets had under-performed the headline indices during the week ended May 27. The mid-cap and small-cap indices had gained only two percent and 1.5 percent, respectively.

By Rohit Vaid

(Rohit Vaid can be contacted at [email protected])