SC interest waiver verdict, border tension, FII flow and what else may guide market this week

Has the much-awaited downturn started on Dalal Street, or is it just a temporary blip in a long-term bull market? The week that saw geopolitical issues and weak global cues trigger a major selloff in domestic stocks has surely dented investors’ confident in Indian market.

People are looking at their portfolios keenly to decide where they should lock in the profits, and where they might be able to use any big correction to catch the bus that they missed last time.

Sensex and Nifty closed 3 per cent lower for the week gone by, as a liquidity-fuelled run lost steam amid political and global economic uncertainties. US tech stocks, the frontrunner of the post-Covid bull run, are suddenly falling like a pack of cards.

Remember, Indian equities – and for that matter much of world markets – have been following US markets to the ‘T’ in recent months.

A likely Supreme Court verdict on a plea seeking waiver of interest on loans under EMI moratorium all through the Covid lockdown days could emerge a key factor in the week ahead, especially for bank stocks, which in turn have a large influence on the benchmark indices. The evolving situation on the India-China border can emerge another major market mover. Besides, macroeconomic data and overseas portfolio flows are likely to be key decider.

“Uncertainties await the market next week, be it in the form of global economic data points or geopolitical uncertainties related to border tensions. Indian market has been running in sync with its global counterparts. Markets globally seem to be losing momentum and could go into consolidation. Investors advised to be alert,” said Vinod Nair, Head of Research at Geojit Financial Services.

Going by the buzz on Dalal Street, here are the key factors that may guide market in the week ahead:-

China border tensions: Tensions on the Line of Actual Control in Eastern Ladakh remain high, as troops from Indian and Chinese side are positioned in their firing range, each refusing to back down. In the war of words, both sides have blamed each other for the evolving situation. China on Saturday said it will not lose “an inch of its territory”. Markets will keep a close eye on developments on this front, as in case of any clash, there could be a negative impact in stock markets.

FIIs turn bearish: August saw foreign institutional investors buy Rs 47,080 crore worth of domestic equities, but the first week of September saw them withdraw money from Indian stocks. They sold stocks worth Rs 675 crore last week, as per data available on NSDL. However, including the debt market, they invested a net of Rs 1,589 crore in India.

Global markets: US stocks have seen a substantial drop in last two sessions, led by a selloff in technology stocks that had surged massively in the post-March rally. Any further profit booking in these scrips may have a negative impact on Indian markets as well.

Covid rages on: India is still reporting record daily cases, that too at the fastest pace in the world. The official patient count has surpassed the 40 lakh mark with deaths mounting to nearly 69,600. Investors will track any news on vaccine development and any hopeful news could give them something to cheer.

Happiest Minds, Route Mobile IPOs: Two initial public offers (IPO) open for subscription next week. Happiest Minds Technologies, promoted by a founder of Mindtree, will attempt to raise up to Rs 702 crore from September 7. The price band of the issue has been fixed at Rs 165-166 per share. Route Mobile, an omni-channel cloud communication service provider, said its Rs 600 crore IPO will hit the primary market on September 9. The price band for this offer has been fixed at Rs 345-350.

SC to hear interest rate waiver case
The Supreme Court will hold the next hearing on petitions seeking interest rate waiver for the moratorium period on September 10. This will put banking names in focus as any adverse stance or remark by judges could ensue selling in bank stocks. “Media reports suggest the apex court is inclined to giving some relief to borrowers for their hardships due to closure of businesses in lockdown. And the banking sector could pay the price,” said Nirali Shah, Senior Research Analyst, Samco Securities.

IRCTC, BHEL Q1 earnings: The earnings season has entered the penultimate week, which will see a few major companies come out with their earnings. On Monday, CG Power, General Insurance Corporation and Info Edge will release their numbers, followed by Future Consumer and Spencer’s Retail on Tuesday. Eveready Industries and Indiabulls Ventures will disclose their profit-loss statement on Wednesday, followed by Hindustan Aeronautics, J&K Bank on Thursday and Adani Green, BHEL, IRCTC on Friday.

Macro data: The government will release July industrial production and manufacturing data on Friday, which have been discouraging for the past few months. Any improvement in the numbers may give hopes to investors. Meanwhile, RBI will also release deposit and bank loan growth data for the fortnight ended August 28 and forex reserves data for the week ended September 4.

Technical Outlook: Nifty formed a bearish engulfing candle after a very long time. The Banking index, which is a major contributor to the benchmark index also closed with significant losses. The index has been trading at overbought levels for an extended time along with the global indices. “It would be advisable for traders to lighten their long positions in the market and maintain a negative outlook with a sell on rally strategy. Once the immediate support of 11,100 is broken on the downside, Nifty might head to test the lower end of the channel which is placed at 10,700. Immediate resistance is now placed at Rs 11,600,” said Shah.

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