Mumbai, Aug 9
An impending US interest rate
hike, coupled with key economic data points and the continuing logjam in
parliament might flare up volatility in the upcoming weekly trade,
analysts said.
"Volatility is expected during the initial part of
the upcoming week, as the markets will focus on the key US economic
data, domestic inflation and factory output figures," Anand James,
co-head, technical research desk, Geojit BNP Paribas, told IANS.
Major
data points such as the Consumer Price Index (CPI) and Index of
Industrial Production (IIP) are expected to be released on August 12,
following which the Wholesale Price Index (WPI) will be released on
August 14.
These data points are significant as they will show
the inflation trajectory and give further cues on whether the Reserve
Bank of India (RBI) might go in for an unscheduled rate cut.
The
RBI, in its third monetary policy review on August 4, had kept the
repurchase rate, or its short-term lending rate, unchanged at 7.25
percent. The RBI had informed that it will await further transmission of
the earlier cuts by banks and data points.
Markets are doubtful
over the RBI's ability for a future easing of the monetary policy in the
hindsight that the US Fed's decision on its own rates is coming up in
September.
"The US data is key in deciding whether the Fed will
raise rates or not in September. The jobs data that were released late
on August 7 night will also play on investors sentiments, when the
markets starts on Monday," James predicted.
The US economy added
215,000 new jobs last month. In June the employment figures went up by
231,000, while during May it stood at 260,000.
The data point is
significant -- as it shows recovery in the US economy, based on which
the US Fed is likely to raise interest rates in September.
With
higher interest rates in the US, the FPIs (Foreign Portfolio Investors)
are expected to be led away from emerging markets such as India.
According
to Devendra Nevgi, chief executive of ZyFin Advisors, the real
deal-breaker in the coming week might come if the government finds a way
to end the impasse in parliament.
"This is the last week of
parliament's monsoon session and if the government is able to conduct
some business and give a clear picture on the GST (goods and services)
bill, that will be a real deal-breaker," Nevgi said.
Investors
have been reluctant to chase higher prices given the possibility that
the reform process might be stalled due to the government's inability to
conduct business in Parliament.
However, on a positive side,
Nevgi cited the increase in participation of the domestic retail
investors and felt the fall in global commodity prices seems to be
working in Indian equities' favour.
"There has been a major shift
in the way the domestic retail investors have come in and aggressively
participated in the markets lately. Equities are now seen at par with
gold and real estate when it comes to investment options," Nevgi
elaborated.
Another positive point for the Indian market was the decline in commodity prices of oil and gold.
The international oil prices at the world benchmark index-- Brent was lower for the sixth consecutive week at $49.26 a barrel.
Gold prices plunged from a peak of $1,900 an ounce in September 2011 to a five-year low of $1,086 an ounce on August 6, 2015.
"This downfall in commodity prices is a good news for India as it is a major consumer of both oil and gold," Nevgi added.
Vaibhav
Agarwal, vice president and research head at Angel Broking, said that
the positive cues such as dovish commentary by RBI, good monsoon, low
inflation coupled with rupee stability and falling commodity prices,
will support the market in the coming week.
"Good rainfall and
higher cultivation have put to rest the worries surrounding rains and
rural demand which is associated with it," Agarwal told IANS.
(Rohit Vaid can be contacted at [email protected])
