Macro-data, growth pangs to drive equity indices’ trajectory

Bombay Stock Exchange.

Mumbai,  Macro-economic data points along with the direction of foreign fund flows and US Fed’s monetary policy are expected to influence the Indian equity market’s trajectory next week, analysts opined.

Additionally, the rupee’s movement against the American dollar and the progress of US-China trade deal as well as crude oil price fluctuations will impact investors’ risk-taking appetite.

“The major trend which is developing is a rally in the commodity markets, especially metals. The US dollar has begun to see overhead supply, EU economic data is improving. A phase 1 US-China trade deal and dovish US Fed may make this trend more visible,” Edelweiss Professional Investor Research’s Chief Market Strategist Sahil Kapoor told IANS.

“As suggested earlier, Nifty has entered a consolidation phase which played out last week. It now seems that fresh upmove may begin as we enter deeper into December month.”

In terms of macro-data, investors will look forward to the release of industrial production, retail and wholesale inflation figures next week.

These data points hold significance as the Reserve Bank in its last monetary policy kept lending rates intact thereby prioritising rising inflation over grim economic growth.

Next week, the National Statistics Office is slated to release the macro-economic data points of Index of Industrial Production and Consumer Price Index on December 12, followed a day later by Wholesale Price Index and India’s November trade figures.

“We expect the inflation to remain close to or above 5 per cent by March 2020, which means that a rate cut in the next MPC in February 2020 is highly unlikely,” Motilal Oswal Financial Services’ Retail Research Head Siddhartha Khemka said.

“We continue to maintain that there will be no more rate cuts unless inflation falls back towards 4 per cent. Thus there is a good probability of a prolonged pause over the next 3-4 quarters.”

Apart from macro-data economic data points, rupee’s movement against the US dollar will influence investors’ sentiments.

According to Sajal Gupta, Head Forex and Rates, Edelweiss Securities, unlike last week the rupee might not exhibit any further strength.

The Indian currency is expected to range from 71.10-71.80, next week from its previous close of 71.1950.

In addition, technical charts showed that National Stock Exchange’s Nifty50 entered into an ‘Engulfing Bear’ candle formation suggesting bearishness.

“Last hope for bulls is placed at 11,880, if index breaches that level then further lower levels is possible in the index,” HDFC Securities’ Retail Research Head Deepak Jasani said.

“On failure to do this, index may show positive or sideways movements in the next week.”