Global cues, rupee movement to drive Indian equity markets

Mumbai: Global cues, along with the government`s measures to revive growth and tackle the non-performing assets (NPAs) issue are expected to determine the way forward for the Indian equity markets during the upcoming week.

Besides, the rupee`s movement against the US dollar and the direction of foreign funds flow will also have a major bearing on the trajectory of the equity indices.

"Equity markets are expected to remain range-bound next week and driven mostly by stock-specific action. However, investors will take cues from global developments, especially the geo-political situation," Devendra Nevgi, Chief Executive of Zyfin Advisors, told IANS.

"On the domestic front, reform developments over the NPA issues and growth concerns after the subdued GDP numbers will be eyed. Nevertheless, domestic flows are expected to continue despite negative macros."

Apart from global cues, Indian currency`s movement against the US dollar would be keenly watched by investors, as earnings of export-oriented sectors like IT and pharma might be impacted due to a strengthening rupee. 

"On year-to-date basis, the Indian rupee has appreciated by 7.2 per cent. This will benefit the import segment and lower inflation. However export-oriented sectors like software, pharmaceuticals, automobiles and textiles will suffer," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.

"This will impact their guidance, earnings per share and subsequently impact their scrip prices."

However, on a weekly basis, the Indian rupee closed flat at 64.02-03 to a US dollar.

According to Hariprasad M.P., Senior Vice President and Head Treasury at Centrum Direct, last week saw the US dollar-Indian rupee pair moving in a narrow range (63.90 to 64.20) with an appreciation bias for the Indian rupee.

"Resolution in the Doklam standoff with China and the general positive trend in the markets helped the rupee gain compared to the previous week," Hariprasad said.

"The appreciation of the Euro against the US dollar also helped strengthen the Indian rupee. The pair is expected to again trade in a narrow range in the coming week ."

Another major factor for the Indian equity markets will be the direction of foreign funds flow given the pull-back in foreign institutional investors` (FIIs) investment. 

Figures from the National Securities Depository Ltd revealed that foreign portfolio investors (FPIs) divested equities worth Rs 14,706.68 crore, or $2.29 billion, during the month of August, whereas during August 28-September 1, FPIs invested in equities worth Rs 300.12 crore, or $46.99 million.

Provisional figures from the stock exchanges showed that FIIs sold stocks worth Rs 2,352.07 crore, while DIIs (domestic institutional investors) bought scrips worth Rs 3,399.8 crore during the week ended September 1.

On technical levels, the NSE Nifty is expected to make upward movement towards 10,070 points.

"Technically, Nifty, having closed above 9,952 points, looks set for some more up-move towards 10,030-10,070 points next week," Deepak Jasani, Head -- Retail Research, HDFC Securities, told IANS.

"Weakness could emerge if the support of 9,851 points is broken."

Last week, key equity indices gained around one per cent each on hopes of a rate cut by the Reserve Bank of India, coupled with short-covering and healthy auto sales and manufacturing data.

Consequently, the 30-scrip Sensitive Index (Sensex) of the BSE surged by 296.17 points or 0.94 per cent to 31,892.23 points.

Similarly, the Nifty50 of the National Stock Exchange (NSE) made gains. It closed at 9,974.40 points, up 117.35 points or 1.19 per cent.