Derivatives expiry to drive equity markets (Market Outlook)

The expiry of derivatives, coupled with third-quarter results and a decision of US interest rates in the backdrop of rising commodity prices, are set to drive the Indian equity markets in the upcoming week.

"We have a slew of results coming out next week from majors such as HDFC Bank, Maruti, ICICI Bank (and the like) which would provide direction to markets," Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.

Pankaj Sharma, head of equities for Equirus Securities, echoed similar views, elaborating that quarterly earnings would dictate the trends on the indices.

"In the next week we would see some more key quarterly numbers from companies and this will drive performance of individual stocks," said Sharma.

The week will see the unveiling of quarterly earnings of firms like HDFC Bank, Colpal, BEL, Maruti Suzuki, ICICI Bank, Dabur, Bharti Airtel, Yes Bank, TVS Motor, Larson & Tubro (L&T).

"Global issues will continue to play a much larger role for market direction in general," Sharma predicted.

Dhruv Desai, director and chief operating officer at Tradebulls, forecasted that volumes might subside on account of the expiry of derivative contracts.

"Markets continue to remain volatile with a negative bias as selling pressure continues on account of the F&O (Futures and Options) expiry next week and the uncertainty over the crude oil prices," Desai noted.

"We expect volumes to remain low over the coming few sessions and markets to continue to remain lackluster."

Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, pointed-out that apart from Q3 numbers, the Federal Reserve's rate setting meeting scheduled for January 27-28 is going to be the major trend setter in the coming week.

"The week ahead would see the FOMC (Federal Open Market Committee) meeting taking centre stage, with markets keenly weighing the prospects of the US Fed continuing with the rate hike trajectory in the backdrop of growth worries across globe," James cited.

Nitasha Shankar, vice president for research with YES Securities, said that trade above the previous week's high could extend the short covering rally into the next week.

"The medium-term trend remains weak until, we see a higher high and higher low," Shankar explained.

Moreover, the rupee's trajectory and the activity of foreign portfolio investors (FPIs) will have a direct bearing on the indices.

"We expect a more stable rupee in the coming week. The stability is expected from a rebound in global equities and crude oil prices," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

On a weekly basis, the rupee closed flat at 67.63 (January 22) to the dollar from its previous close of 67.63 (January 15).

However, it touched a 28-month low of 68.17 - its weakest level since early September 2013 during the intra-day trade on January 20.

The weakness in the rupee value indicates the massive foreign funds outflow from the Indian equity and debt markets. This was evident as foreign portfolio investors (FPIs) were net sellers during the week ended January 22.

"We expect markets to continue to remain weak going ahead, as FIIs continue to remain net sellers. Recession fears have gripped the global funds, who continue to pull out from all emerging markets," Agarwal added.

Figures from the National Securities Depository Limited (NSDL) showed that the FPIs were net sellers during the week ended January 22. They divested Rs.8,836.59 crore or $1.30 billion in the equity and debt markets from January 18-22.

Similarly, data with stock exchanges showed that the FPIs sold stocks worth Rs.4,634.64 crore in the week under review.

Nevertheless, the data further showed that DIIs bought stocks worth Rs.5,986.56 crore.

Receding crude oil prices, combined with bearish global cues and a plunge in the rupee value, dented the Indian equity markets during the just-concluded weekly trade.

Selling frenzy by foreign investors, coupled with falling exports and dwindling global growth, led both the bellwether indices to close the week on a flat note.

Nevertheless, during the intra-week trade, both indices had touched levels previously seen during May, 2014.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) closed flat -- 19.38 points or 0.07 percent down - to 24,435.66 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) declined marginally by 15.35 points or 0.20 percent to 7,422.45 points.

(Rohit Vaid can be contacted at rohit.v@ians.in)