The bleak outlook for the rupee against the dollar will keep stock investors worried about what is in store for them in the week ahead. Although the rupee could see some strength early next week, thanks to the weaker-than-expected US jobs data, brokers said potential selling by foreign institutional investors could negate any optimism.
"The rupee is weakening and markets are nervous anyway. If it slips further, portfolios which are locked to the rupee could go for selling," said Deven Choksey, managing director, K R Choksey Securities.
Top companies such as Tata Power, Tata Motors and Jet Airways, among others, are due to announce their first quarter results in the week ahead. Last week, broader markets were down following the RBI's policy announcement to leave key rates unchanged. The disappointment in the market continued with the rupee trending down further. The Sensex closed at 19,164, while the NSE Nifty ended at 5,677 on Friday. The rupee touched 61.10 a dollar on Friday. Fund managers said the disappointment over US jobs data might bring in some cheer for the rupee and stocks.
US stocks rose and the dollar fell on Friday as the unemployment data raised hopes that the US Federal Reserve would continue with its third round of bond buying programme, known as Quantitative Easing (QE) 3.
""This (US jobs data) means that the US Federal Reserve would continue with the QE3 programme for longer than expected. This is positive news for our markets," said Navneet Munot, chief investment officer at SBI Mutual Fund. Most US market indices ended the day marginally up on Friday.
At the end of the week, FIIs were net buyers in stocks worth Rs 1,048 crore, while domestic institutional investors (DIIs) were net sellers at Rs 1,767 crore.
Some analysts said if the rupee settles down at these levels, it could come as a relief to markets. "The Nifty is likely to find support levels at 5,600 and in case of a reversal, the Nifty could move up to 5,850-levels," said Shubham Agarwal, vice-president and senior technical analyst (equities) at Motilal Oswal Financial Services.
Analysts said investors are optimistic about the prospects of software exporters because of the weaker rupee. Since early June, the BSE IT sector has risen by over 22 per cent. "There is a lot of interest in this sector with a weakening rupee along with improvement in the US jobs data. The only hurdle could be a strict US immigration bill," said Gaurav Dua, head of research at Sharekhan. Infosys and TCS have both has risen by about 20 per cent during the period.
Dua said telecom stocks such as Bharti Airtel and Idea could also see investor interest. "Till around a few months back, stocks of this sector were beaten down. But with Bharti Airtel and Idea Cellular seeing growth in volumes and pricing uptakes after a long time, this sector is likely to perform well in the market," said Dua.
Both companies announced their results last week. While Bharti Airtel was up 3 per cent at the end of the week, Idea was down 2.2 per cent.
RESULTS THIS WEEK
Tuesday
Tata Power
Wednesday
NMDC
Tata Motors
Thursday
Jet Airways
