RBI Pol­icy And Macroe­co­nomic Data Key To The Mar­kets

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In­dian mar­kets ap­pear to be lay­ing the blame on the geopo­lit­i­cal ten­sions pre­vail­ing be­tween North Korea and US, where the for­mer re­cently ac­cused the lat­ter of declar­ing war against it. How­ever, what the in­ter­na­tional ten­sions did not do to the mar­kets was done by just one blow from the In­dian army's sur­gi­cal strike against Naga in­sur­gents in Myan­mar that washed off cru­cial sup­port lev­els of the bench­mark in­dices. The in­dices de­clined more than 4.5% in just 7 trad­ing ses­sions, record­ing their long­est los­ing streak in 2017. But when we say that mar­kets have turned proac­tive, the re­cent fall might have been a re­sult of cau­tious­ness ahead of the corporate earn­ings and do­mes­tic eco­nomic data. Ex­perts in a way have hinted at weak­ness go­ing ahead in the val­u­a­tions and macroe­co­nomic num­bers to be re­leased in Oc­to­ber.

Ear­lier, the de­cline in GDP growth to 5.7% in June quar­ter from 6.1% in March had cre­ated neg­a­tive sen­ti­ments in the mar­kets. The coun­try has toned down its GDP tar­get for FY18 from 7.3% to near about 6.46.6%. There has been con­sid­er­able sell-off of dol­lars out of In­dian mar­kets from for­eign in­vestors. The fear of fu­ture eco­nomic growth and its pace per­sists, which has been re­frain­ing fresh buy­ing in the mar­kets. As a re­sult, ru­pee is seen de­pre­ci­at­ing against the dol­lar with higher de­mand from im­porters and bankers. As a mea­sure, the gov­ern­ment is mulling to in­ject nearly Rs 50,000 crore for stim­u­lat­ing the econ­omy, but this would be at the cost of fis­cal deficit tar­get. The fear that the fis­cal deficit would over­run the tar­get is real, as 92.4% of the en­tire year tar­get has been al­ready reached. The June quar­ter cur­rent ac­count deficit hit the high­est level in the last four years at 2.4%. Au­gust and Septem­ber saw a net eq­uity sell-off by FIIs of nearly Rs 18,966 crore. The DIIs bought equities worth Rs 28111 crore dur­ing the same pe­riod to off­set the sell­off. The big­gest do­mes­tic in­vestor and the res­cuer of In­dian mar­kets, LIC, is said to have poured Rs 29,000 crore as of now into the equities in FY18 and it is ex­pected to in­vest a to­tal of Rs 50,000 crore.

We are at the Septem­ber F&O ex­piry and, go­ing for­ward, the mar­kets are go­ing to be driven by se­ries of do­mes­tic macroe­co­nomic events in the month of Oc­to­ber. Among the ma­jor events, we have RBI pol­icy re­view on Oc­to­ber 4, where RBI is ex­pected to main­tain sta­tus quo ow­ing to de­cel­er­at­ing growth, mar­ginal in­fla­tion and weak global cues. Fur­ther, we have Septem­ber quar­ter corporate earn­ings, where ma­jor re­sults would start from mid-Oc­to­ber. Mean­while rou­tine macroe­co­nomic num­bers like IIP, CPI, WPI, auto sales, man­u­fac­tur­ing and ser­vice data will have short term im­pact on the mar­kets.

Nev­er­the­less, mar­kets have wit­nessed al­most a con­tin­u­ous rise post de­mon­eti­sa­tion on a monthly ba­sis. Even the last two months have seen con­sol­i­da­tion but not ma­jor cor­rec­tion. con­sid­er­ing the long-term time frame. Hence, we re­main bullish on the mar­kets, but with some cau­tious­ness, as mar­kets are trail­ing at their cru­cial sup­ports, which if breached, may bring in one more cor­rec­tion go­ing for­ward. Stay tuned, stay stock-spe­cific! Sub­scribers can send their feed­back and queries on tech­ni­cals port­fo­lio guide to fnied­i­tor@dsij.in

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