Equities could continue to remain choppy in the week ahead, mainly due to expiry of September derivative contracts. Market was volatile with a downward bias in the week gone by, and in the absence of any domestic triggers, players are looking to global markets for cues.
The widely held view is that the Nifty may remain in a tight range of 8700-8900, at least till the RBI monetary policy event on October 4. After that the focus will shift to September quarter earnings.
Expensive valuations could hinder big gains, players feel, but add that liquidity is good enough to avoid a sharp correction near term.
Benchmark indices have rallied over 20 percent since March, riding the general upswing in emerging markets.
“The broader long-term India story is fairly robust and remains intact but shorter-term, the market is richly valued, Gautam Chhaochharia of UBS Securities says.
He further says the market is expecting a reasonably strong second half recovery and that is where the key would be for the market direction into the next couple of quarters.
Any dip in the market with expectations of earnings following through will be a buying opportunity, says Sridhar Sivaram of Enam Holdings who expects the Reserve Bank to cut 50 basis points by October this year on back of positive inflation numbers last month.
In the week gone by, benchmark indices rebounded marginally after previous week’s sell-off. The Sensex gained 0.2 percent and the Nifty rose half a percent while the broader markets outperformed nicely with the Nifty Midcap rising 2.2 percent in the week gone by. The Federal Reserve’s decision to keep rates unchanged lifted the market sentiment.
On economic data front, infrastructure output for the month of August is scheduled to be announced in the coming week.
Banking and financial stocks will be in focus towards the end of next week, especially ahead of RBI’s fourth bi-monthly policy statement that scheduled to be announced on October 4. Expectations of rate cut (likely in October) has built up after the sharp fall in retail inflation to 5.05 percent in August compared with 6.07 percent in same month last year and a 2.4 percent contraction in July factory data; and also after the formation of monetary policy committee. Bank loan growth data may be announced next week.
Auto stocks will also be in focus ahead of its September sales data that will be announced on October 1.
In corporate action, Arnold Holdings (5:1), Viaan Industries (2:1), Rural Electrification Corporation (1:1) and Associated Stone Industries (1:4) will start trading ex-bonus next week.
On Monday, HPL Electric & Power’s Rs 361-crore public issue will be closed while rear axle shafts manufacturer GNA Axils will list its equity shares on exchanges.
Globally, US new home sales data for August, consumer confidence data for September, gross domestic product (GDP) data for Q2 will be announced next week. UK GDP data for the second quarter will also be declared.