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NEW DELHI: Falling for the second week in a row, headline indices Sensex and Nifty finished with a loss of 2 per cent each for the week gone by.
While the market participants attributed the fall to Budget disappointment, the valuation of the market was also a reason behind the correction.
"The weight of high valuation itself has caused such a dramatic decline in the index.
Nifty currently trades at a price-earnings ratio (P/E) of 29 times which is at its all-time high.
Under such circumstances, when the Budget didn’t give any immediate short-term growth boosters, the markets had to react negatively," said Jimeet Modi, Founder - CEO, SAMCO Securities - StockNote.
In the coming week, quarterly earnings will be the key influencer.
The trend in global markets, macroeconomic prints and the flow of foreign funds, too, will steer the market.
Let's take a look at the key factors that can influence the market in the coming week:June quarter numbersACC, Wipro, YES Bank, HDFC Bank, HDFC AMC, Federal Bank, Tata Elxsi and Bandhan Bank are among the companies that will come out with their April-June quarter numbers in the coming week.
While better numbers may give a leg up to investor sentiment, subdued sets of numbers will add to the gloom.
The macro meterIndia's Wholesale price inflation and balance of trade data for June will be released on Monday.
The industrial production data for May and retail inflation prints for June were released after market hours on Friday.
Industrial production slipped to 3.1 per cent in May 2019 against 3.8 per cent in May 2018.
Inflation, as measured by the Consumer Price Index (CPI), rose to 3.18 per cent in June from 3.05 per cent in May.
Inflation stayed in the comfort zone, albeit at an eight-month high in June, giving the RBI opportunity to cut rates again to help stimulate demand.
The market is expected to react to these numbers in the coming week.
Progress of monsoonThe monsoon has covered almost all states of the country, delivering 28 per cent more rainfall than average in the last week.
The progress of monsoon in July has reduced the rain deficit in the country substantially to only 12 per cent, from a worrying shortfall of 33 per cent at the end of June.
The revival of the monsoon gives a much-needed shot in the arm to agriculture and market may take a positive cue out of it.
Global sentimentIn the coming week, markets will read China's second quarter GDP numbers and industrial production prints for the month of June, Japan's trade balance numbers for June and eurozone's core CPI for June.
These numbers will tell us about the health of the global economy.
The G7 meetFinance ministers of G7 nations are meeting on July 17-18 in Chantilly, France to discuss ways to counter the slowdown in the economy in the time of trade wars.
Reuters reported that G7 discussions will focus on how to resolve pressing problems such as the world economy, Sino-US trade tensions, fair exchange rates between the major economies, US anger over France’s plan to tax tech firms such as Google, and Trump’s threat to slap levies on European autos.
Even though there may not be any immediate impact of G7 meet on the domestic market, any positive development may infuse positive sentiment.
The flow of foreign money July so far has witnessed foreign portfolio investors (FPIs) selling Indian equities while buying debt.
As per available data with NSDL, FPIs have sold equities worth Rs 4,954 crore and bought debt worth of Rs 8,505 crore, coming out as net buyers to the tune of Rs 3,554 crore in the Indian financial market in July so far.
The flow of foreign funds will remain a key trigger for the rise and fall of the market.
Crude oil - rupeeThe rupee fell 25 paise to close at 68.69 against the US dollar on Friday amid rising crude oil prices.
The US Gulf of Mexico crude output dropped by more than half from disruptions caused by a tropical storm which kept the oil prices up, but concerns over a global crude surplus in the months ahead limited gains.
As per Reuters, the International Energy Agency (IEA) said on Friday that surging US oil output will outpace sluggish global demand and lead to a large stocks build around the world in the next nine months.
This may result into softer crude oil prices which is a boon for the Indian economy as it reduces the pressure from the country's fiscal books.
Technical outlook weakNifty made a ‘Bearish Belt Hold’ on the weekly scale and analysts say breaching the 11,600 level will be the key to instill confidence.
Till then, the index may continue to stay in a range.
"The Nifty attempted to cross the hurdle zone of 11,600-11,620 on the upside however couldn’t sustain in the higher territory.
The junction of 40-hour exponential moving average and the hourly upper Bollinger Band also acted as a key barrier," said Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan by BNP Paribas.
"The weekly chart shows that the bears are dominant, resulting in a breach of the 20-week moving average, which is a crucial medium-term moving average.
Bears are occupying a dominant position and are expected to drive the Nifty down going ahead.
On the downside, 11,500 and 11,461 will be the initial levels to watch out for with a potential to head further down," he added.
