NEW DELHI: Enduring bouts of volatility, the domestic stock benchmarks Sensex and Nifty eked out marginal gains last week, breaking the losing spree of the last three weeks.
On a weekly basis, both Sensex and Nifty inched up by about half a per cent.
Global, as well as domestic factors such as F&O expiry, speculations around the US-China trade talks, slow pace of monsoon and lingering concerns over the liquidity crunch in the NBFC space, continued to influence the mood of the market.
All eyes will be fixated on Budget during the coming week, whereas progress in monsoon, international cues and flow of foreign capital are the key factors that will decide the course of the market.
Market observers that believe there will be increased volatility ahead of Budget and participants should remain cautious in making their bets.
"There will possibly be an increase in volatility ahead of Budget. Since the importance of the event is high and is able to produce significant trend, we believe it is better to be on the sideline and see the outcome," said Mustafa Nadeem, CEO of Epic Research.
Having said that, let's take a look at some factors that will be important for the market during the coming week:
Finance Minister Nirmala Sitharaman will present the full Budget for the financial year 2019-20 on Friday. The market is expecting policies and measures that will give an impetus to the economy. Auto, housing, agri and infra sectors are likely to be a top priority. "The auto sector is at the tipping point. Depending on how the government provides support, these stocks will either revive or fall off the cliff. Other sectors that are likely to benefit from Budget would be low-cost housing, agriculture and infrastructure as the government knows very well the multiplier effect to attain the growth and employment targets," said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.
The progress of monsoon is vital for Indian economy, as it is a key determinant of agri output and rural incomes.
The trend so far indicates that rainfall has been among the worst-ever while its distribution has been as poor as in the drought year of 2014. However, the situation is improving as the monsoon has revived in the past week and heavy rainfall is expected in western and northern India from the middle of the coming week. The threat of El Nino has now ebbed, which has helped the monsoon regain momentum.
The ebb in trade tension
World's two largest economies – the US and China – on Saturday agreed to resume trade talks, which was positive for markets across the globe. As per Reuters, the US and China agreed to restart trade talks after President Donald Trump offered concessions including no new tariffs and an easing of restrictions on tech company Huawei in order to reduce tensions with Beijing. Markets will be filled with positive sentiment if talks progress on a smooth track and an amicable solution to the tussle is reached.
The oil-producing cartel Opec and its allies, including Russia, are to meet on July 1-2 to discuss curbing oil output by 1.2 million barrels per day (bpd). Meanwhile, Reuters reported that Russia has already agreed with Saudi Arabia to extend by six to nine months a deal with Opec on reducing oil output. Oil prices have seen an uptick in the wake of growing tension in West Asia. Tightened supply will exert pressure on oil importers such as India and elevated crude oil prices will sour the mood of the market.
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