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NEW DELHI: While an over 4,600-point fall in the BSE Sensex in 25 sessions has baffled one and all, thanks to a host of factors such as a weakening rupee, rising crude oil prices and spiking bond yields, some analysts feel there is more pain left in this market.
With US sanctions on Iran coming in a few weeks and back home five states- Madhya Pradesh, Rajasthan, Chhattisgarh, Mizoram and Telangana – going into assembly elections, volatility is going to increase and the market would, at best, go into a long consolidation.
In terms of absolute points, the market witnessed biggest-ever fall last week, with the Sensex losing about 1,850 points, or 5.11 per cent, and Nifty shedding 614 points or 5.62 per cent.
From their August record highs of 38,989.65 and 11,760.20 points, Sensex and Nifty have pared about 12 per cent each.
A massive Rs 3.79 lakh crore investor wealth was eroded on last Friday.
Since Monday, September 3, 2018, investors have lost Rs 21.96 lakh crore on BSE.
Macro data, earnings and state election uncertainty will play key roles in the coming week.
Let's take a look at the key factors that will sway the market next week:
CPI and IIP dataCountry's industrial production (IIP) data for August and retail inflation (CPI) prints for September will be released on Friday.
Industrial production grew 6.6 per cent in July, backed by the good performance of the manufacturing sector and higher offtake of capital goods and consumer durables.
While several experts are expecting the IIP numbers to remain the same for August also, a print greater than the last month will infuse positive sentiment in the market.
Retail inflation eased to a 10-month low of 3.69 per cent in August.
The numbers may come slightly higher owing to falling rupee and rising crude prices.
Some key global macro numbers will also be in the radar of market.
Among them, monthly payrolls report and September CPI of the US and China's Caixin Services PMI for September are most important.
Key earnings lined up for the weekSome corporate bigwigs, including Hindustan Unilever, Tata Consultancy Services (TCS), Zee Entertainment and Bandhan Bank, will announce their September quarter earnings during the week.
Beating Street estimates, TCS had reported a 23.46 per cent year-on-year (YoY) growth in consolidated profit for June quarter at Rs 7,340 crore.
FMCG major Hindustan Unilever had reported at 19.17 per cent YoY jump in net profit at Rs 1,529 crore for the quarter ended June 30, 2018.
Their positive earnings numbers can be a booster dose for the bear-hammered market.
Rupee movement to be keyThe rupee touched the historic low of 74.22 last week.
The domestic unit ended nearly 19 paise down at 73.77 on Friday after the Reserve Bank of India (RBI) kept interest rates unchanged in a surprise move.
There was a market-wide consensus that rates would be increased to stem the fall in the local currency.
A falling rupee will distort the maths for country's current account deficit and put the fiscal deficit target in jeopardy.
Experts do not expect the rupee health to improve if crude oil prices remain elevated.
Crude oil shows no signs of relentingCrude oil prices ended higher on Friday after climbing to four-year highs earlier last week, amid concerns that supply will continue to tighten ahead of the imposition of US sanctions against Iran that will come into effect in November.
Saudi Arabia and Russia have said they would increase the output slightly to ease the disruptions from restrictions on Iran.
Meanwhile, the US is considering a waiver for countries that are cutting their imports of Iranian oil.
As per news agency Reuters, the US is actively considering waivers on sanctions it will reimpose next month for countries that are reducing their imports of Iranian oil.
India has said it would buy 9 million barrels of Iranian oil in November.
Bond yields fallingDomestic as well as the US bond yields will be another factor influencing market sentiment.
RBI’s status quo on repo rate cheered the bond market as the benchmark government bond yield dipped 13 basis points to close at 8.03 per cent.
Bond yields and prices move in opposite directions.
Short to medium term rates fell 10-40 basis points in the bond mart.
The US dollar and bond yields have been on an upward trajectory, backed by a positive outlook for the US economy and solid jobs report.
Last Friday, US bond yields jumped to their highest levels in many years.
A further increase in treasury yields will aggravate capital outflow, putting pressure on an already weak domestic currency.
Nifty’s technical outlook weakThe Nifty50 hit a two-year low in an eventful session on Friday and formed a ‘Three Black Crows’ pattern on the daily chart, which suggests the market is not done with the correction yet.
Bearish candles on the daily and weekly scales suggested the bears were holding a tight grip on the market, said Chandan Taparia of Motilal Oswal Securities.
"During the week’s action, the Nifty formed a big bear candle with good volumes and it was the third consecutive strong bear candle, which indicated that the bears were having a strong momentum and the Nifty could continue to show further negative momentum," HDFC Securities said in a report.
"Now all technical evidence is in favour of the bears and we could see further weakness in the coming days.
Overall, we maintain a negative stance as long as the index stays below the previous day’s high.
Downside targets for the index are 9,900, 9,300 and 8,700, which are key retracements of the last rise that began from 6,825.
However, if a bounceback starts, then Nifty could test 10,800 to 11,000 levels,” the report said.
Stock Market
Earnings, polls among 6 factors that’ll decide if Nifty50 can rebound this week
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