Market Outlook: Key Factors That May Dictate Equity Indices This Week

Mumbai: The upcoming macro-economic data points on industrial production and inflation, along with the escalation in US-China trade war, are expected to determine the trajectory of key Indian equity indices next week. According to market observers, factors such as global crude oil prices, combined with the rupee's movement against the US dollar and the direction of foreign fund flows, will also impact investors' risk-taking appetite. Investors are expected to closely follow the macro-economic data points such as the IIP (Index of Industrial Production) and Balance of Trade figures.

The Central Statistics Office (CSO) is slated to release the macro-economic data points of IIP and CPI (consumer price index) on September 12, Wednesday.

"Next week is loaded with macro-data releases such as IIP, CPI, WPI (Wholesale Price Index) and, more importantly, the trade deficit for August. The CPI release would influence the next RBI (Reserve Bank of India) moves in the month of October," Devendra Nevgi, Delta Global Partners Founder and Principal Partner, told IANS.

Besides macro-data, escalation in global trade protectionist measures, as well as high crude oil prices are expected to exert pressure on the Indian rupee in the coming week. Any further depreciation in the rupee's value is expected to have a negative impact on the domestic indices.

Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, said the Indian rupee is expected to remain under pressure as the US dollar could rise after US jobs data "surprised positively".

"At the same time, US President has hinted at fresh set of tariffs on China. Both these news items can drive rupee lower. We expect a range of 71.60-72.60 on spot," Banerjee told IANS.

The Indian rupee breached the 72 per US dollar-mark for the first time during the week ended on Friday.

The rupee ended the week at 71.73 to a USD -- 73 paise weaker from its previous corresponding close of 71 per greenback.

"The currency has depreciated by 13 per cent YTD, while the 10-year yield has breached the eight per cent-mark during the week. Given these factors and the widening fiscal deficit, RBI is likely to consider a hike in interest rate in the near future," said Vinod Nair, Head of Research at Geojit Financial Services.

"Additionally, investors will be keen on the upcoming CPI inflation and US unemployment data to get some cues on market direction."

In terms of investments, provisional figures from the stock exchanges revealed that foreign institutional investors sold scrips worth Rs 789.60 crore and the domestic institutional investors bought stocks worth Rs 1,167.85 crore in the past week.

Technical charts showed that National Stock Exchange (NSE) Nifty50's intermediate trend remains bullish.

"Technically, while the Nifty has corrected this week, the intermediate trend of the Nifty remains up," said Deepak Jasani, Head of Retail Research for HDFC Securities.

"The uptrend is likely to resume once the immediate resistance of 11,760 points is taken out. Crucial supports to watch on the downside are at 11,393-11,340 points."

Last week, depreciation in the rupee's value and high crude oil prices dragged the Indian equity market lower.

Accordingly, the S&P Bombay Stock Exchange (BSE) Sensex closed at 38,389.82 points, lower 255.25 points or 0.66 per cent from its previous close.

Similarly, the wider NSE Nifty50 closed lower. It ended at 11,589.10 points, down 91.4 points or 0.78 per cent from the previous week's close.