Q3 results, GST meet to guide equities

Mumbai: Quarterly earnings results, coupled with government's efforts to build a consensus over the contours of the Goods and Services Tax (GST) are expected to guide the trajectory of the Indian equity markets during the coming week. Besides, trends in the foreign funds' flows, rupee movement, global crude oil prices and the assessment of the demonetisation impact would be other major factors that will influence the movement of the equities markets.

"Markets will focus on the corporate earnings for 3Q FY 2017 to assess the impact of demonetisation, especially on the domestic cyclicals, consumption and bank stocks," said Devendra Nevgi, Chief Executive, Zyfin Advisors. "From the data so far available, it seems that November was not so good, but the December data appears mixed."

Nevgi pointed out that the build-up of expectations from the upcoming Union Budget will be another major theme for the markets. "The expectation from the Union Budget on February 1, are running high from a sentiment perspective on the pump-priming measures for the economy," he elaborated.

According to Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services, investors will closely watch the movement of FII (foreign institutional investor) flows. "FIIs have remained net sellers in equities persistently and prospects for their return will be closely followed," James explained.

In terms of foreign inbound investments, FIIs had sold Rs 1,103.96 crore worth of equities during the week ended January 13, provisional figures from the stock exchanges have showed. Similarly, figures from the National Securities Depository (NSDL) disclosed that FPIs (foreign portfolio investors) remained net sellers in the stock market.

They sold a total of equity and debt instruments worth Rs 2,685.03 crore, or $394.38 million, from January 9 to 13. In addition, the GST panel's meeting would be tracked closely for any signs of consensus, James opined. On January 4, Finance Minister Arun Jaitley said that he hopes to resolve the two vexed issues of Integrated GST (iGST) and dual control at the Council's next meet on January 16.

Jaitley at that time admitted that the GST Council "was racing" against time to meet the pan-India indirect tax's implementation deadline of April 1, 2017. Recently, a pre-budget rally was triggered by expectations on more spending support from the upcoming Union Budget. Nonetheless, the Indian rupee is likely to remain under pressure and trade within a range of 67.70/90 and 68.40/50.

"Lack of RBI's intervention and a constant drip of outflows from FPIs would ensure rupee under-performs the rest of Asia," said Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities. On technical-levels, the NSE Nifty is expected to correct after last week's bounce-back.

"Technically, the Nifty index could attempt to test the next targets of 8,460-8,520 points in the coming week," said Deepak Jasani, Head - Retail Research, HDFC Securities. Short-term weakness could, however, emerge if the support of 8,382 points is broken, he added.

Last week, the key domestic indices gained around two per cent each, despite huge volumes of foreign funds' outflows, depreciation in the rupee value and broadly mixed global cues. The barometer 30-scrip Sensex of the BSE surged by 478.83 points or 1.8 per cent to 27,238.06 points. Similarly, the wider 51-scrip Nifty of the National Stock Exchange (NSE) rose by 156.55 points or 1.9 per cent to 8,400.35 points.