Markets to track global cues, rupee movements

Probability of a rate hike by the US Fed in September hurts trading sentiments

Markets slumped during the week, with the benchmark BSE Sensex erasing all gains of 2015 after weak factory growth in China raised global growth concerns while the devaluation of the yuan and worries over foreign capital outflows dragged the rupee to two-year low. Further, probability of a rate hike by the US Federal Reserve in September also weighed on investor sentiment.

For the week ended August 21, the 30-share Sensex cracked 701 points, or 2.5 per cent, to close at 27,366.07 and the 50-share Nifty shed 219 points or 2.6 per cent to end at 8,299.95. The Sensex had ended the calendar year 2014 at 27,499.42.

In the broader markets, the BSE Mid-Cap Index slumped 2.1 per cent and the BSE Small-Cap index slipped 1.3 per cent.

MARKET VIEW
“What’s brewing in the global markets since the last few days could intimidate the bulls to a large extent. The US markets, for example, have corrected by almost seven-eight per cent last week, and the worrisome part is most of the global indices have closed at almost their low points of the week, indicating that there could be some carry over momentum to next week. For India, in the last week, the scorecard of the sectors indicates that the selling was a broad-based selling. CNX Auto, Bank Nifty, Metals and such other sectors shed in the range of three-five per cent and hordes of midcap stocks corrected significantly. Rupee has depreciated to 66 levels from 63.70 odd exactly two weeks ago. The cash market FII sell numbers in the last two days of the previous week indicate almost half-a-billion dollars net sell figure,” said Kunal Bothra, head-advisor, LKP Securities.

“Along with this, Nifty breached a significantly crucial mark of 8,350, which had been acting as a support since the last two months of this consolidation, marking the beginning of a likely downtrend. For the coming week, the key resistance for the Nifty would be closer to the 8,400 mark. And the next two key supports would be 8,180 and then 7,940 on Nifty spot levels. Volatility would also rule the week because of the F&O expiry of the Aug contracts. Options data indicate that the 8,200 PE strike has a highest build up and if this level breaches decisively, then expect a sharp unwinding of the Put Options written earlier,” he added.

KEY EVENTS
The crude oil prices slipped below $40 a barrel on Friday for the first time since 2009 on over supply glut. Oil exploration majors RIL and ONGC lost 5-6 per cent.

Grim China data amid global economic slowdown allowed the rupee to tumble below 65.80 against the dollar.

The manufacturing activity in China shrank for a sixth straight month in August. The Caixin/Markit flash purchasing managers' index dropped to 47.1 in August from July's final reading of 47.8.

Prime Minister Alexis Tsipras resigned on Thursday, as he was unable to overturn austerity and bring Greece out of crisis.

Moody's Investors Service reportedly trimmed its forecast for India's economic expansion for the current financial year to seven per cent from its previous forecast of 7.5 per cent due to drier-than-usual weather conditions.

The Reserve Bank of India (RBI) granted in-principle nod to 11 payments banks. RBI had received 41 applications for payments banks. The central bank has approved applications of National Securities Depository Limited (NSDL), Reliance Industries and Aditya Birla Nuvo among others.

KEY STOCKS
On the sectoral front, eight out of 12 indices ended in the negative territory with BSE Realty index losing nine per cent. However, BSE Healthcare index was the top gainer up over two per cent. Tata Motors slumped 6.36 per cent on persistent concerns over Chinese slowdown. The company also lost about 5,800 JLR vehicles in China’s port blast.

Infosys rose 0.14 per cent after it announced the launch of three enhanced service offerings in Design Thinking, Platforms and Knowledge-Based IT.

Lupin jumped 4.52 per cent after it received final approval from the United States Food and Drugs Administration (USFDA) for its Fenofibrate Tablets 54 mg and 160 mg, a generic version of Teva’s Fenofibrate Tablets, 54 mg and 160 mg. Drug majors Sun Pharma and Glenmark Pharma also received approval from USFDA for new drugs and surged three per cent and eight per cent each.

Metal stocks lost sheen due to softening global commodity prices and concerns over slowing demand from China.

Vedanta, Hindalco, NMDC, Hindustan Zinc lost between 7-12 per cent. A subsidiary of Vedanta, Bharat Aluminium Company (Balco) decided to close down its Rolled Product business due to a steep fall in aluminium prices globally, negative margins and huge imports. Telecom shares ended lower after a news report said Reliance Jio is set to launch 4G-enabled handsets in the second week of September. Bharti Airtel, Idea Cellular RCom and Tata Communications ended down between one-six per cent.

Amtek Auto tanked 57 per cent after the exchange decided on Tuesday to remove the stock from the F&O segment with effect from October 30, 2015.

WEEK AHEAD
Trend in the global equities, movement of rupee and crude oil along with progress in monsoon will dictate the trend on the bourses in the coming week. Investors will keenly await for the August F&O expiry due on Thursday, August 27.